Foreign Portfolio Investors’ Transactions Lift Nigerian Stocks by 0.38% in Sept as Consumers Expect High Inflation Rate…

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    The Nigerian Stock Exchange (NSE) recently released its report on domestic and foreign portfolio participation in equities trading for the month of September 2019 and showed that equities market transactions increased when compared with the equities trades done in August 2019.

    Total transactions of the foreign portfolio investors (FPIs) recorded in September 2019 was twice the combined transactions recorded by retail and domestic institutional investors in the same month, suggesting that foreign investors traded largely amongst themselves.

    The FPI transactions in September 2019 showed that foreign portflio outflows rose by 61.21% to N46.72 billion, while the foreign portfolio inflows increased by 36.68% to N47.73 billion.

    This may have also caused the marginal increase in treasury bills stop rates, especially 182 – day and 364 – day rates, as their respective monthly average rates rose to 11.77% and 13.29% in September from 11.59% and 12.89% respectively in August.

    Total transactions on the nation’s bourse increased to N141.45 billion in September 2019 (from N121.99 billion in August 2019); of which FPI transactions rose to N94.45 billion (from N63.90 billion); however, total domestic transactions fell to N47.00 billion (from N58.09 billion).

    Domestic institutional transactions declined by 30.82% to N23.64 billion in September 2019 from N34.17 billion recorded in August 2019.

    Also, retail investors shunned the equities market in August as transactions from this group moderated by 2.76% to N23.26 billion from N23.92 billion as local investors’ sentiments waned.

    Following the decision of the domestic investors to stay on the side lines, the total FPIs transactions to total local investors participation ratio tilted to “67:33” in September from “52:48” in August.

    Hence, the NSE All Share Index (ASI) rose marginally by 0.38% to 27,630.56 index points in September 30, 2019 (from 27,525.81 index points in August 2019).

    Consequently, most of the sectored guages rose in the month of September: the NSE Banking, NSE Insurance, NSE Consumer Goods and NSE Oil & Gas indicies increased by 7.10%, 8.56%, 7.85% and 20.63% respectively to close at 343.99 points, 116.00 points, 567.41 points and 239.35 points respectively.

    However, NSE Industrial index moderated by 0.72% to close at 1,083.31 points. Meanwhile, the Q3 2019 consumer expectations survey report released by CBN showed that consumers were positive about Nigeria’s economic outlook for the Q4 2019 and next twelve months.

    The overall consumer confidence index for Q4 2019 and next twelve months were positive at 22.8 points and 31.5 points respectively (from 20.9 points and 30.5 points respectively in Q3 2019); indicative of their optimism for an increase in household income as well as savings amid anticipated improvement in the country’s economic conditions.

    Consumers expected inflation rate to rise in Q4 2019 as the index that rose to 21.1 points (from 13.5 points in Q3 2019).

    According to the report, the general increase in price in Q4 2019 would be driven majorly by purchase of food and other households needs, as well as purchase of motor vehicles.

    The survey also showed that the “buying intention” index for consumer durables in the next twelve months fell to 48.4 points from 50.0 points as a majority of the consumers felt the next twelve months would not be an ideal time to buy consumer durables such as furniture, gas cooker and electronics.

    The consumer expectation survey reaffirms our position on inflation rate (to increase) for the remaining months in the year 2019 (see Cowry Weekly Report dated October 18, 2019).

    Also, we feel that consumer optimism, for an increase in household income and particularly savings, would be melted by the proposed increase in taxes and the increasing inflation rates.

    Hence, the expected overall positive economic outlook might be unrealistic and its resultant negative effect on the local bourse might stifle its positive performance printed in September

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