A Tidal Wave That Passed The NSE By

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Tuesday, September 29, 2020 / 10:04 AM / By FBNQuest Research / Header Image Credit: Energy Fuse

 

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The Washington-based Institute of International Finance (IIF) estimates that portfolio investors pulled US$90bn from EM in March alone and that perhaps half the damage has since been reversed. We see from the NSE's data that the offshore retreat in the month was just US$88m. The exit by fixed-income players from Nigeria would have been larger yet it is clear the sell-off was uneven: very limited in China, more pronounced elsewhere in Asia, and very heavy in Latin America (and South Africa). The numbers are marginal in an EM context but there has been a net outflow by foreigners from the NSE every month this year other than May.

                                                                                             

Total transactions on the NSE declined by 9.2% y/y to N1.20trn in January-August 2020.

 

The foreigners' share declined from 44.9% to 39.1% over the same period.

 

The NSEASI has advanced for the past seven sessions, and the ytd sell-off has narrowed to just -1.2% ytd. Turnover has picked up off a very low base, to a little more than US$10m equivalent in the last five sessions. Local institutions have probably bought stock from the offshore community. We are a long way from calling a recovery, given the fundamentals.

 

Foreign transactions on the NSE (N bn)

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Sources: Nigerian Stock Exchange (NSE); FBNQuest Capital Research

     

We asked recently why the NSEASI has performed so much better this year than the NSE20's -30.3% ytd in Nairobi (Good Morning Nigeria, 22 September 2020). Kenya has better prospects for growth and household spending than Nigeria.

 

It may be significant, however, that in today's scared and Covid-driven world Nigeria is not overly indebted while Kenya by many criteria is debt distressed. Nigeria also has a substantial base of domestic institutional investors: the share of equities in the PFAs' assets under management is less than 5%, compared with 17% in Kenya in December 2018.

 

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