ISSUES WITH FOREX AND OTHERS MAKE FOREIGNERS LESS INTERESTED IN STOCKS

Considering domestic trades account for 84% of all NGX transactions

Foreign investors' interest in stocks has continued to decline amid unpredictability, insecurity, a persistent foreign exchange liquidity crisis, and other macroeconomic difficulties, despite the fact that domestic investors participate in 84% of all transactions made on the Nigerian Exchange Limited (NGX).

Ahead of the interim dividend and the 2022 full-year results, local investors have persisted in bidding for businesses with better profitability and large dividend payout despite election anxiety.

According to the December 2022 edition of the exchange's domestic and foreign portfolio investment report, foreign participation in the local bourse has so far reduced in previous years due to concerns over currency liquidity and monetary policy, placing their turnover at 16%.

As a result, the All-Share Index (ASI), which had been on a bullish run since September 2022, increased by 5.80% at the close of trading on February 20, 2023. Experts remarked that this was largely due to the fixed income instruments' underwhelming yield, which encouraged investors to purchase fundamentally sound stocks with alluring dividend yields.

With some significant exceptions, such as the 1999 election, which witnessed the end of military dictatorship, and the 2015 election, the market has historically been volatile during election season.

Economists claim that the strong earnings and dividend payouts made by companies during earnings season are mostly to blame for the positive outlook among domestic investors.

Yet, other industry professionals continue to advocate for cautious trading as the elections in 2023 approach while maintaining their positive perspective on dividend yields and capital growth in bellwether stocks.

In a market analysis, Parthian Securities analyst Azeezat Awonuga said that because fixed income returns have lately decreased, investors are ready to hunt for gains in the stock market.

As we anticipate earnings from the banking industry, which accounts for around 60% of market volume and constitutes the majority of the fundamentals, positive profits will entice investors to spend more money.

Akosile Oluwasanmi, a different investment research analyst from Investment One Capital Management Limited, noted that investor sentiment may be lowered by the election-related uncertainty and the economic cash crunch, causing them to take profits, but added that positive corporate earnings may also motivate investors to increase their positions.

Remember that domestic investors registered N1.730 trillion in transactions in the first ten months of 2022, while international portfolio investors' participation concluded at N349.59 billion.

The Nigerian Exchange (NGX) report from October on domestic and international portfolio involvement in equity trading revealed that local investors outperformed foreign investors in terms of total equities market transactions, which grew year over year to N2.079 trillion as of October 30, 2022.

In the first 10 months of the year, domestic investors made transactions totaling N1.730 trillion, or 83.19 percent, while overseas investors made transactions totaling N349.59 billion, or 16.81 percent.

Analysis of domestic transactions revealed that retail transactions totaled N580.83 as opposed to N494.87 billion in the first 10 months of 2021. Institutional investors made up a larger portion of the domestic market, totaling N1.149 trillion during the review period as opposed to N720.34 billion during the same period in 2021.