The weak sentiments in the equities market extended to July 2021 as total value traded on the local bourse slumped to lows last seen in February 2017, based on the recently released NGX Domestic & Foreign Investment report for July 2021. According to the data, the total value traded declined by 10.9% m/m to N89.8bn (US$218.2m) in July from N100.8bn (US$244.9m) in June 2021. Transactions by foreign investors hit a historic low to N15.5bn (US$37.8m) in July from N23.4bn (US$56.9m) in June 2021. The benchmark index, All Share Index (ASI), recorded a YTD loss of 4.3% in July 2021.
Retail investors (previously institutional investors) who traded N37.6bn (US$91.4m) dominated transactions at the domestic front, up 4.2% m/m from N36.1bn (US$87.6m) in June 2021. On the other hand, the activity level among institutional investors dipped by 11.2% m/m to N36.7bn (US$89.1m) from N41.3bn (US$100.3m) in June. The low participation by the institutional investors pulled domestic transactions, declining by 4.0% m/m to N74.2bn (US$180.4m). Notably, foreign outflows of N8.0bn (US$19.5m) outpaced foreign inflows of N7.5bn (US$18.2m) in July 2021, resulting in a net outflow of N0.5bn (US$1.3m) in July from a net inflow of N4.4bn (US$10.7m) in June. Sadly, FX illiquidity continues to drive foreign apathy to Nigerian risk assets, particularly equities.
In the first half of the year, most global stock exchanges delivered impressive returns. However, the bears largely dominated the local equities market, as investors showed a preference for risk-free assets as soon as yields in the fixed income market rose. With the rough patch witnessed in the first 7 months of the year, we believe the worst for the equities market is behind us. For one, the moderation in inflation suggests a continued accommodating tone with little or no room for increased yields. For foreign investors, we believe gains from the Eurobond issuances and SDR allocations will give the CBN room to clear FX backlogs, which may create a reentry point for investors in the local market.