FX liquidity Could Trigger Foreign Investors Exits
Stranded foreign investors may find an exit route from the Nigeria’s financial market as foreign exchange as liquidity improves.
Chapel Hill Denham said in a macroeconomic note that this week, profit taking on selected stocks is expected to dominate trading activities.
After the close of trading session on Monday, bearish trend knocked off more than N12 billion from the stock value as investors counted losses.
The impact of profit taking will likely cascade into a negative performance for the benchmark index, analysts at Chapel Hill stated in the note.
Beyond that, Chapel Hill reckoned that stronger FX liquidity may now induce foreign investors to reduce their exposure in the Nigeria market.
Thus, this portends a likely bearish trading activity.
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The Nigeria’s equity market sustained its bullish run from the prior week, supported by the continued strong appetite for naira risky assets by local investors amid generally positive earnings releases by tier 1 banks.
Meanwhile, equities market retreats on Monday as the All-Share Index down 9 basis point (bps)
Yesterday, the domestic bourse recorded a loss of 9 bps to settle at 25,582.23 points, ending the 5-day bullish streak as a result of sell-offs in GUARANTY (-2.5%), DANGSUGAR (-3.6%) and UBA (-2.3%).
Consequently, investors lost ₦12.2 billion as market capitalisation fell to ₦13.4 trillion while year to date loss worsened to -4.7%.
Then, activity level reduced as volume and value traded declined 39.5% and 47.2% to 254.0 million units and ₦2.0 billion respectively.
The most traded stocks by volume were UBA which transacted 44.3m units, ZENITH 30.8m units and ACCESS (29.1m units) while ZENITH (₦536.1m), UBA (₦292.0m) and ACCESS (₦196.6m) topped by value.
Sector performance remained bullish as 3 of 6 indicators that analysts at Afrinvest cover closed positive, 2 lost while the AFR-ICT index remained unchanged.
The Banking and Consumer Goods indices ended on a bearish note, losing 0.7% and 0.4% respectively on account of sell-pressures in GUARANTY (-2.5%), UBA (-2.3%) and DANGSUGAR (-3.6%).
On the flip side, the Insurance index posted the best performance, climbing 0.7% on the back of buying interest in NEM (+8.7%).
In the same vein, gains in ETERNA (+9.1%), OANDO (+2.2%) and CAP (+0.6%) lifted the Oil & Gas and Industrial Goods indices by 0.2% and 3bps respectively.
Investor sentiment as measured by market breadth (advance/decline ratio) fell to 1.1x from the 2.1x recorded previously as 16 stocks gained against the 15 that declined.
The top gainers were ETERNA (+9.1%), NEM (+8.7%) and CILEASING (+8.3%) while HONYFLOUR (-6.2%), CHAMS (-4.5%) and REDSTAREX (-4.4%) lost the most.
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Analysts at Afrinvest expect profit-taking to persist in the next trading session.
