NSE: Operators confident of market rebound with RSA multi-fund investment

Capital market operators are in an upbeat mood ahead of the July 1 commencement of the Retirement Savings Account (RSA) multi-fund investment structure and review of the equities market by the Nigerian Stock Exchange (NSE).

The operators told our reporter on Monday in Lagos that the initiative would boost liquidity in the market, making it to rebound in the second half of the year.

Our correspondent reports that PENCOM amended the investment regulation of Pension Reform Act in April 2017 to incorporate the new provisions in line with the realities of the market.

One of the amendments was the introduction of the RSA multi-fund to resolve the challenge of asset-liability risk management experienced by pension fund administrators.

It was also reported that the multi-fund structure comprises four funds.

Fund One is for young contributors based on choice: Fund Two is for young and middle-aged contributors, 49 years and below; Fund Three is for pre-retirees, ages 50 years and above; while Fund Four is for retirees.

Malam Garba Kurfi, the Managing Director, APT Securities and Funds Ltd. , said the new funds structure, if properly implementation and monitored, would compel Pension Fund Administrators (PFAs) to increase their stake in the equities market.

Kurfi said PFAs under the new structure had more room to play in the market unlike before where PFAs’ maximum investment threshold in the equities market was 25 per cent.

He explained that PFAs, under Fund One, could invest up to 70 per cent into variable investment instruments such as quoted equities, Fund Two up to maximum of 55 per cent and Fund Three up to 20 per cent.

Kurfi attributed the lull in the stock market to the exit of foreign portfolio investors due to political uncertainty ahead of 2019 general elections.

He said higher investment opportunities by other emerging markets and absence of institutional investors such as PFAs contributed to the trend.

“The way forward is the restructuring of trading in the market as done by the NSE and the funds by PENCOM.

“All these are coming with effect from 1st July 2018. I believe the initiatives will improve the fortune of the market and result to likely bounce back,” Kurfi said.

Also speaking, Mr Oladele Sotubo, Executive Director Investments, Stanbic IBTC Pension Managers Ltd. said the multi fund investment structure would compel PFAs to invest not below the required threshold.

Sotubo said PENCOM’s rule stipulated that PFA equities exposure in Fund One should be a minimum of 20 per cent and maximum of 75 per cent.

He also said the review would boost the participation of PFAs in the market.

Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., said the multi fund investment structure would provide long-term liquidity for the market.

He said it would reduce the current instability in the market as a result of “hot money” coming in and going out.

He, however, noted compliance by PFAs had remained a major challenge in the equities market due to lack of proper monitoring by PENCOM.

Omordion said PENCOM should ensure effective implementation and monitoring of the policy to achieve the desired aim.

“Before now, PFAs are to invest 25 per cent of pension fund in the equity market but less than 10 per cent are invested in stocks because they were interested more in bonds, infrastructure funding and others,” he said.

It was reported that crucial indicators of the performance of the capital market last week dropped by 2.74 per cent due to losses posted by major blue chips in five consecutive days.

Specifically, the NSE All-Share Index declined by 1,065.49 points or 2.74 per cent to close at 37,862.53 against 38,928.02 achieved in the preceding week.

Also, the market capitalisation shed N385 billion to close at N13.716 trillion compared with N14.101 trillion posted in the previous week.