The bearish sentiments in the Nigerian equities market extended into August as the All-Share Index (ASI) lost 1.1%, the fourth monthly loss year to date. This moderated the YTD gain to 16.7% in August from 17.9% in July, 21.3% in June and 25.6% in May 2022. On the other hand, the total value traded on the local bourse increased by 22.5% m/m to N123.97bn (US$289.0m) from N101.2bn (US$236.9m) in July. Despite the increase in activity level, the continued uptick in Fixed Income yields has made the equities market less attractive, causing investors to flock to the Fixed Income market. Although there were favourable H1 2022 earnings results, it was insufficient to boost investors’ sentiments. 

Domestic investors’ share of total transactions improved to 77.2% in August from 70.7% in July (YTD–84.0%), while foreign investors’ share was down to 22.8% in August from 29.3% in July (YTD–15.97%). The increase in total transaction value was driven by domestic investors (+33.9% m/m) as foreign investors (-5.0% m/m) reduced participation level. On the domestic front, the increase in activity level to N95.8bn (US$223.3m; +33.9% m/m) was broad-based on the back of increased transactions by both institutional investors (+37.0% m/m to N55.95bn; US$130.4m) and retail investors (+29.9% m/m to N39.8bn; US$92.8m). On the other hand, like in July, when foreign investors decreased their activity level (-29.7% m/m), the narrative was the same in August, as foreign participation level was down 5.0% m/m. However, unlike the net outflow position of N2.3bn (US$5.4m) achieved in July, the reverse was the case as foreign investors retained a net inflow position of N3.4bn (US$7.8m) in August. The increase in foreign inflows (+15.4% m/m) as outflows declined (-22.3% m/m), caused the net inflow position. 

We expect the bearish sentiment in the domestic equities market to persist through Q3 2022 on the back of the CBN’s hawkish monetary stance. The YTD gain is currently at 14.8%. The continued rise in yields will fuel more movement of funds into the Fixed Income market. We, however, note that the selloffs in the equities market continue to create attractive entry points into fundamentally sound names