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Speculative opportunities dominate trading
The growing incursion of foreign investors into the Nigerian stock market has been described as one where foreign institution seeks speculative opportunities to dominate the country’s domestic equities market.
The Managing Director/Chief Executive Officer of Lambeth Trust & Investment Company Limited, Mr David Imafidon Adonnri, who made this remarks in an interview, said the move of the foreign investors when compared with investment in the bond market showed an average yield on equities as being very low.
It would be recalled that the management of the Nigerian Stock Exchange had said that 81 per cent of investment in the market was presently being controlled by foreign institutional investors even as this has been the cause of the depletion of values of market equities.
According to Adonri, “Foreign institutional investors seeking speculative opportunities now dominate our equities market. Although when compared to domestic fixed income market, average yield on equities is very low. However, it surpasses what is obtainable in several advanced markets. The relatively stable exchange rate environment is an additional attraction for foreign portfolio investment in Nigeria ‘s financial assets.
Other than few domestic investors, several retail investors who are yet to recover from the recent crash of equities continue to shun the market. Several market operators and institutional investors who participated actively have also suffered untold damages to their balance sheets due to the near crash of the equities market.
On why local investors has continue to shown the stock market, Adonri explained that, “Domestic investors who were frightened by past events in the equities market now seek safety by migrating their financial assets to fixed income securities.
He noted that, domestic investment in the equities market, especially the primary market can be remarkably improved if addressed from perspective of the macro economy through policies that will force down inflation and interest rates to single digit. “This will enable yields on equities to become competitive against debt securities”, he added.
In his comment, a doyen of the stockbrokers’ group in the market, Chief Gbadebo Olatokunbo, said many local investors have shown the stock market due to way and manner the Federal Government is handling the issues of investment in the country, especially the stock market.
He said the continued presence of powerful capital market offender/brokers and lack of firm regulatory framework by the Securities and Exchange Commission (SEC), has further resulted in investors shying away from the stock market.
The Managing Director Crane Securities Mr. Mike Eze had said that the present state of the market showed that “foreigners are not exiting per say rather what is happening is that they are taking away the profits which they have made both in the equities market as well as in the bonds market.
He said that it is noticeable this time around because they have devised a systematic approach to their attitude towards it.
“They now do short term profit taking instead of what used to obtain in the past whereby they leave their funds in the system for a longer period of time because of probably the fact that the longer the more money but now that the market has crashed if they stay long they may end up loosing their money,” he said.
Eze noted that the issue of foreigners coming into the market and exiting at will has always been a big issue since the Nigerian capital market crash of 2008.
“Now under a normal market situation, there has to be a level playing field provided by proper and distinct regulation where participants are at liberty to enter and exit at will. So the fact that foreign investors are leaving the equity and bond market should not really be an issue because a properly regulated market like ours should make provision for free entry and free exit points depending on the discretion of the investor, in this case the foreign investor.Share