Observers Expect Return of Institutional Investors to NSE

By Modupe Gbadeyanka

With the market going bearish again after the initial return of bulls to the stock market in the past few weeks, investors have been advised to remain calm because things would soon get better.

Analysts at United Capital Research said the year-end portfolio rebalancing would most likely force buying interest from institutional buyers, which should push the Nigerian Stock Exchange (NSE) to the positive territory.

“In the month of December 2019, we expect the continued moderation in yield and increased net inflows from OMO maturities to spur investors demand for local equities.

“Also, we anticipate further buying interest from institutional buyers amid yearend portfolio rebalancing. Looking at historical data, we observed that the m/m gains in December averaged 2.8 percent over the last 5 years, with the highest monthly gain coming in at 6.5 percent in 2016.

“Accordingly, we see the possibility of a Santa Claus rally in December 2019. However, the anticipated bullish performance is unlikely to erase the current YTD loss,” United Capital Research said in one of its notes.

Last month, the domestic equity market halted its long-standing monthly bearish trend as the benchmark index, NSE-ASI, was up 2.4 percent m/m to settle at 27,002.2 points while YTD return improved to -14.1 percent (October 2019: -16.1 percent). Notably, the market traded up on 12-day out of the 20 trading days of the month.

In all, market capitalisation inched higher by N202.9 billion m/m to close November 2019 at N13.0 trillion.

The bullish performance was spurred by volatilities in the fixed income market as secondary market yields

and primary market stop rates, crashed to more than a 3-year low.

Accordingly, there was a renewed interest across the board, as all the sectors closed the month in the positive region. Notably, the banking sector recorded the highest gain, up 15.3 percent m/m.