Foreign inflow, portfolio rebalancing responsible for stock market growth – Experts

Some financial experts on Thursday attributed the ongoing rally on the Nigerian Stock Exchange (NSE) to renewed foreign inflow and portfolio rebalancing on the strength of second quarter results.

They told our reporter in separate interviews in Lagos that a lot of foreign investors had diverted their investment into the nation’s bourse.

Alhaji Rasheed Yusuuf, the Managing Director, Trust Yield Securities Ltd., said that both foreign, local and institutional investors were back in the market in one form or the other due to companies’ fundamentals.

Yusuuf said that strong performance by some banks, as well as consumer goods and oil companies, made demand to be very high in the market with a rush to increase holdings.

He stated that the performance, in spite of recession, encouraged people back to the market.

Yussuf said that the second quarter performance had changed people’s perception about the economy, showing that it was not as bad as it was painted.

He said that the market was gradually stabilising because portfolio investors were not investing the way they used to in the past.

Yussuf stated that companies were doing well even in the face of tightening by government through various policies.

He expressed optimism that the market growth would be sustained because it was based on fundamentals, not on speculation.

The managing director said that favourable economic environment, foreign exchange stability and ‘increased foreign reserve would sustain investors’ confidence in the market.

Yussuf said that some investors had started taking position in the market ahead of third quarter earnings due to impressive second quarter numbers released by most quoted companies.

Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., said that portfolio rebalancing by fund managers on the strength of half-year earnings contributed to equities price rally.

Omordion said that low valuation of stocks due to currency devaluation of 2015/2016 made prices of stocks cheaper when compared with other markets in the world.

He stated that relatively stable exchange rate due to robust investors and exporters window introduced by the Central Bank of Nigeria (CBN) in the foreign exchange market further boosted foreign investors’ inflow.

“With South African economy struggling with recession, many portfolio investors are likely to look elsewhere in the short to medium-term for juicy returns,” Omordion said.

He said that Nigeria remained a destination of choice with the economy on the path of recovery, as shown by the GDP that was gradually coming out from a negative terrain.

NAN reports that the NSE market capitalisation, in just three days between Aug. 7 and Aug. 9, rose by N248 billion or 1.92 per cent to close at N13.144 trillion, against N12.899 trillion at which it opened for the week.

Also, the All-Share Index, which opened for the week at 37,425.15, improved by 718.87 points or 1.92 per cent between Aug. 7 and 9, to close at 38,144.02 following price growth.