Market decline

Foreign investor exit wreaks havoc as stock market falls by 973.2 billion naira in seven months

Eromosele Abiodun and Darasimi Adebisi

Profit taking on share price appreciation recorded last year and exit by foreign investors Had a negative impact on the Nigerian stock market in the first seven months of 2021 as investors lost $ 973.2 billion nairas.

Specifically, the market capitalization, which measures the value of all stocks, fell from 973.2 billion naira in seven months to 20,083 trillion naira from 21,057 trillion naira that the stock market opened in 2021. .

As a result, the Nigerian Exchange Limited All-Share Index (ASI) fell 4.3% to 38,547.08 basis points as of July 30 from 40,270.72 basis points that the market opened during the year under review.

Analysis of market performance in the first seven months of 2021 showed that the stock market, which started the year with a bullish moment from 2020, appreciated 5.3% in January 2021.

The market then reversed due to modest profit taking and returns in the fixed income market, which created a sense of investor confidence.
As a result, the stock market depreciated by 5.9% during the six-month period ended June 30, 2021.

Meanwhile, profit taking eased at the end of July, which marks the start of the second half of the year, with growth of 1.7%.
Further analysis of market performance revealed that market capitalization, which measures the value of all stocks, rose 324 billion naira, from 19.760 billion naira on June 30, 2021 to 20,084 billion naira on the 30th. July 2021, while the Nigerian Stock Exchange (NGX) All-Share Index rose 1.69%, from 37,898.56 points as of June 30, 2021 to 38,547.08 points as of July 30, 2021.

Market participants linked the positive performance to bargaining hunting and positioning ahead of corporate earnings for the six-month period ended June 30, 2021.
While some investors traded cautiously while waiting for company results, some took advantage of low prices to enter the market, hence the gain recorded during the month under review.

At the same time, in line with the upward trend in the market, the sector indices closed on a positive note during the period under review.

The NGX oil and gas index gained 20.40 percent. The NGX Premium Board Index followed with a gain of 6.58 percent while the NGX Banking Index rose 4.06 percent during the month.

The others are NGX Industrial Goods, Pension, NGX 30 and Lotus II registered 4.64 percent, 3.12 percent, 2.78 percent and 2.10 percent in July. On the other hand, the NGX Insurance index fell the most, falling 2.98%, while the NGX Consumer Goods fell 0.54% in July.

Likewise, the Nigerian Exchange (NGX) All-Share Index rose 1.69%, from 37,898.56 points as of June 30, 2021 to 38,547.08 points as of July 30, 2021.
Commenting on the performance, APT Securities and Funds Managing Director Garba Kurfi attributed the decline in the stock market to the exit of foreign investors due to the scarcity of foreign exchange.

He noted that investor profit taking also contributed to the bearish performance of the stock market in seven months.

According to him: “The exit of foreign investors from the country has affected the stock market as many of them choose to leave the country due to difficulties in obtaining foreign exchange.

He added that “other African stock markets are doing better than us because they have attracted more foreign investors. Profit taking by investors resulted from the surge in stock prices in the fourth quarter of 2020, when most stocks doubled in price in three months. “

An analyst at PAC Holdings, Mr. Wole Adeyeye said investors were engaging in profit taking on the appreciation in share prices recorded last year.
He claimed that the July 2021 growth was due to the impressive half-year results of listed banks, others.

According to him: “The market won in July was motivated by the payment of interim dividends to shareholders and impressive corporate profits. Most of the stocks in July were undervalued and investors took a stance in those stocks, which impacted the All-Share Index. Investors have positioned themselves to pay dividends based on fundamentals and this is also boosting the stock market in July. “

He noted that the performance of the stock market in seven months has been affected by government policies; stressed investors took advantage of the relatively strong performance of the fixed income market.

Looking ahead, he maintained that the suspension of the Central Bank of Nigeria (CBN) from supplying foreign exchange to Bureaux de Change (BDC) would generate speculation this month.

According to him, “Foreign investors will be watching if the Naira appreciates amid the latest CBN policy on the foreign exchange market. If the CBN can support the supply of foreign currency to the banking sector, the stock market could appreciate further in August. “

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