Nigeria All-Share Index: Retail investors will determine how it moves

Dear Africa interested individuals:
                                                        
                                                     I have mentioned multiple times in the past that retail investors are critical to the positive performance of any developing countries' stock market.  This has largely fallen on deaf ears in Nigeria.  The appeal of foreign portfolio investors with their large briefcases have stolen the hearts and minds of market regulators in Nigeria.  

The refusal to raise the domestic retail investor to a major player from a peripheral player has been the bane of the Nigerian market for more than five years now.  This has led to market returns being consistently inconsistent.  

The Exchange hierarchy have advised retail investors to invest in mutual funds instead of directly.  I have never been in support of this especially in Nigeria where their operations are shrouded in secrecy with the tacit cooperation of market regulators.  

I looked at the February 2016 report for Domestic & Foreign participation in equity trading on the Nigerian Stock Exchange.  I smiled as "posterity is never prejudiced."  

Domestic retail investors increased their stake in the market by N17.36B ($87m).  This is additional increase from the position at the end of January 2016.  This is even more than domestic institutional that only increased by N16.4B ($82m) during the month of February 2016.  Retail investors invested more in the market than the institutional investors!  Let that sink in.  Who is supposed to be more risk adverse?  Who is supposed to be more knowledgeable about market dynamics?  

Upon further introspection, this is not surprising as I have come to know that brokerage CEOs typically piggy back on investment decisions of foreign portfolio investors.  "I want to know what Blackrock is buying."  Since foreign portfolio investors are more enamored at the moment with out instead of in, the domestic institutional is left to steer their own ship.  

So, what happened to the All-Share Index in February when retail investors took charge of investment inflows?  The All-Share Index rose 3.1% for the month of February!  The Caracas Stock Exchange market index is up 9% YTD while the Nigerian index is down 13.5%.   The Caracas market is retail investor driven and continues to be on the upbeat despite perilous times for the country's economy and its people. 

Homeowners maintain their house and not guests.  There is no better time to lay down markers than now, when the guests are leaving in droves.     

The report is on the right side of the website (http:www.nse.com.ng) for those who will like to read it for themselves.  

Volume (number of investors) brings stability to markets while value brings activity.  Both are important.  The former is the foundation that keeps markets even keeled.  

I hope market regulators are having a rethink of their strategy based on FACTS and not feelings.  The Nigerian market and other frontier markets will not be stable until retail investors are encouraged to return and provided necessary support and guidance to remain investors in the market.   

                                 The TRUTH will set us free; I will keep telling it

                                         Dialecticafricaanalyst@gmail.com

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