Domestic, foreign investors down 39%
Bears rule as domestic, FPI deals drop 39.2% to N97.2bn in May
THE CLOUD OF AN APRIl dead cat bounce on the Nigerian equities market trailed trading activities into the month of May as a bearish atmosphere led to reduced participation by institutional investors...
THE CLOUD OF AN APRIl dead cat bounce on the Nigerian equities market trailed trading activities into the month of May as a bearish atmosphere led to reduced participation by institutional investors in the equities market with sustained investor preference for risk free securities. The latest equity trading report from the Nigerian Exchange shows that there was a 39.23 percent decline in total transactions at the exchange in the month of May at N97.19 billion, down from N159.93 billion recorded in April 2021.
A general bearish condition is in play on the local bourse with aggregate transactions pointing to a decline, but local investors have continued to dominate transactions amidst the high level of illiquidity in the FX market in line with expectations. Local investors outperformed foreign investors in total executed transactions value by 58 percent during the month of May.
Meanwhile, comparing the market’s performance in May to the performance this period a year ago that printed at N119.15 billion, shows that total transactions decreased by 18.43 percent year on year, as against the 64 percent reported in the previous month.
A further analysis of the data showed that between the month under review and the prior month (April 2021) total domestic transactions decreased by 41.70 percent from N131.91 billion in April to N76.90 billion in May 2021. Similarly, the total foreign transactions decreased by 27.59 percent from N28.02 billion (about $68.31 million) to N20.29 billion (about $49.33 million) between April 2021 and May 2021.
With domestic investors maintaining dominance in the local equities market, the NGX portfolio data shows that institutional investors outperformed retail investors by 14 percent in May. A further comparison of domestic transactions in the current and prior month (April 2021) revealed that retail transactions decreased by 9.75 percent from N36.50 billion in April 2021 to N32.94 billion in May 2021. Similarly, the institutional composition of the domestic market decreased by 53.93 percent from N95.41 billion in April 2021 to N43.96 billion in May 2021.
Meanwhile, a historical analysis of the data polled by the local bourse from market operators on their domestic and foreign portfolio investment (FPI) flows highlights the performance of the market over the last decade. Over a fourteen (14) year period, domestic transactions decreased by 59.54 percent from N3.56 trillion in 2007 to N1.44 trillion in 2020 whilst foreign transactions increased by 18.45 percent from N616 billion to N729 billion over the same period. Thus, the total domestic transactions accounted for about 74 percent of the total transactions carried out in 2020, whilst foreign transactions accounted for about 26 percent of the total transactions in the same period. The transaction data for 2021 shows that total foreign transactions stand at N198.54 billion, whilst total domestic transactions are N735.11 billion.
Nigeria’s ETF market sterling, N20.3bn cap in Q1
In other areas, at the close of the first three months in 2021, the Nigerian Exchange Traded Funds (ETFs) total market capitalization hit N20.32 billion from 12 listed ETFs on the local bourse with a daily average of N463.45 million in transaction value and over 83 thousand average daily transaction volume, the quarterly ETF data (Q1) from the NGX show.
On the global scene, the first quarter of 2021 has seen a continuation of the strong inflows witnessed at the end of 2020 throughout the Global ETF industry. Total flows in the ETF industry surpassed $100 billion each month, with new assets peaking at $130 billion in February, thus bringing the quarterly total up to $349 billion.
However, blockchain ETFs have benefitted from the incredible surge in bitcoin. The Amplify Transformational Data Sharing ETF (BLOK), one of the market’s most popular and liquid Blockchain ETFs, was up 46.3 percent in its price per share in Q1, 2021. According to the report, cannabis ETFs and stocks are soaring this year possibly due to the favourable policy outlook and improvement in industry fundamentals.
Investor sentiments have been positive on ESG-themed ETFs and exchange-traded products (ETPs) with global inflows of $55.8 billion in the first three months of the year.
On the local fronts, the Nigerian ETP/ETF market has witnessed a sterling performance since the rise of the pandemic in early 2020. Trade volumes rose by 3064 percent from nearly 0.2 million units in Q1 2020 to 5.3 million units in Q1 2021. Similarly, market turnover of total value traded skyrocketed by a mammoth 4556 percent between Q1 2020 and Q1, 2021. Investor sentiments have been positive on alternative instruments like (fungible) ETPs offering the opportunity to hedge portfolios and enter or exit the market.
Further analysis of the data highlighted that of the 12 listed securities, 10 (from Vetiva (4), Meristem (2), Greenwich (1), Lotus (1) Stanbic (1), and SIAML Pensions (1)) were of the equities class exposure while Vetiva listed another bond and NewGold had its commodity asset class, NEWGOLD ETF listed on the exchange.
However, an aggregate of the twelve assets market capitalization for the review period amounted to N20.32 billion with the NewGold ETF accounting for the most (N12.05 billion) of the total market cap. Trailing was Vetiva Griffin 30 with N2.47 billion and Greenwich Alpha ETF with N1 billion in the market while the rest rank in the million range.
The most traded exchange-traded fund during the period on the local exchange was the NewGold ETF in 235 deals, resulting in N29.63 billion transaction value and accounted for 99.91 percent of the total of the most traded ETF. Consequently, the Vetiva Griffin 30 with 38 deals accounted for 0.05 percent of the most active ETFs with a value of N13.94 million while the Lotus Halal Equity ETF, Meristem Value ETF, and the Vetiva Banking ETF accounted for N9.95 million, N2.9 million, and N0.23 million respectively.
Meanwhile, ten brokers drove 99.8 percent of total transaction value and 96.6 percent of total volumes of ETFs traded in Q1, 2021 and these were majorly headlined by ABSA brokers with 43.32 percent of the total transaction value, while Vetiva brokers led the chart with 45.6 percent of the top brokers by transaction volume during the review period.
However, it is positive to state that as the year progresses, it may be worth keeping track of trends like digital assets, ESG, and Cannabis as the main drivers of the ETF on the global fronts.