Capital Market

NGX Tasks Investors On Diversification Of Portfolios

Published

1 year ago

February 27, 2022

Business Echo Magazine

Nigerian Exchange Limited Partner Centre for International Private Enterprise On Capacity Building

…“Just imagine what would happen if you invested all your money in a single security” – Chiemeka

Olushola Okunlade Writes

Nigerian Exchange (NGX) Limited has emphasized the need for diversification of portfolios by investors to ensure enhanced return on investment.

According to NGX, portfolio diversification is the process of investing one’s money in different asset classes and securities in order to minimize the overall risk of the portfolio.

The Divisional Head, Trading Business, NGX, Jude Chiemeka, recently at the Retail Investors workshop organised by the NGX and ARM Securities Limited said as a multi-asset exchange, the NGX had various products for every investor regardless of their investment goals, risk appetite or return expectations might be, listing the products like equities, fixed income, Exchange Traded Funds and derivatives.

Educating investors, Chiemeka said: “Just imagine what would happen if you invested all your money in a single security. Everything would be great as long as the stock’s performance is good. But in the case where the market takes a sudden U-turn, the likelihood of significant loss of investments is increased. The fundamental purpose of portfolio diversification is to minimize the risk on your investments; specifically, unsystematic risk. This is a risk of significant loss is further compounded if the stocks belonged to the same sector like manufacturing because any news publication or information that affects the performance of one manufacturing stock could as well affect the other stocks in a similar way.

Mr. Chiemeka further explained that “If an investor chooses the same asset, he/she can diversify by investing in different sectors and industries. There are so many different industries and sectors to explore with exciting opportunities like pharmaceuticals, Information Technology (IT), consumer goods, conglomerates, financial, agricultural, and so on. Furthermore, NGX is a multi-asset exchange that provides a wide range of asset classes for investors to leverage. Investors could also add other investment options and assets to their portfolios. Mutual funds, bonds, Equity Traded Funds, as well as other asset classes such as real estate and pension plans, are other investments they can consider. Investors are encouraged to ensure that the securities vary in risk and follow different market trends. A typical example is a general trend where the bond and equity markets have contrasting movements. By investing in both these instruments, investors can offset any negative results in one market by positive movements in the other.

Explaining further, Chiemeka said: “A sound diversification strategy, adding Index or bond funds to the mix provides one’s portfolio with the much-needed stability. Also, investing in Index funds is highly cost-effective as the charges are quite low compared to actively managed funds. At the same time, investing in bond funds hedges your portfolio from market volatility and uncertainty and prevents gains from being wiped out during market volatility.”

Chiemeka said, “At the NGX, we will continue to prioritise investor education to ensure that investors understand capital market investments and mechanisms, as only then will they be empowered to make sound investment decisions.”

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Capital Market

NGX Group To Celebrate 2023 International Women’s Day 2023, Ring Bell For Gender Equality

Published

4 weeks ago

February 22, 2023

Business Echo Magazine

NGX Group of Companies 2023 International Women's Day and Ring the Bell for Gender equality

Olushola Okunlade Writes

NGX Group of Companies plans to celebrate 2023 International Women’s Day and Ring the Bell for Gender equality.

NGX Group of Companies recognises that investing in women’s empowerment in the workplace, marketplace, and community is of strategic importance to business growth and sustainability.

For this reason, NGX Group has chosen to celebrate IWD as part of the global UN SSEI event hosted by over 80 securities exchanges in collaboration with the UN Global Compact, UN Women, IFC, and WFE (the “Global Partners”).

The theme of this year’s celebration is ‘Embrace Equity’ and it seeks to celebrate women’s achievements, raise awareness about discrimination and take action to drive gender parity. To this end, our 2023 IWD celebration would build on the global theme, Embrace Equity.

Date: Wednesday, 8 March 2023
Time: 1:00 pm – 2:30 pm (WAT)
Venue: Zoom & Live streamed on YouTube

Participants are to register to attend: bit.ly/ngx-iwd-2023

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Capital Market

Domestic Investors Shun Risks, Stocks On 5-Month Rally

Published

1 month ago

February 22, 2023

Business Echo Magazine

Domestic Investors Shun Risks, Stocks On 5-Month Rally

Olushola Okunlade Writes

Few days to go before Nigeria’s highly anticipated general elections, domestic investors in the local bourse are scooping up positions in stocks, shunning potential risks from the impacts of voter’s choices.

Nigerian Exchange Limited (NGX) All-Share Index (ASI) is up 5.80% already in 2023 as of market close on 20 February 2023, maintaining a bullish run from September 2022. Data from NGX revealed that this has been a result of the outsized participation from domestic investors, who currently occupy 84% of total transactions conducted on the Exchange.

Foreign participation in the local bourse has so far moderated in recent years due to issues around forex liquidity and monetary policy, placing their turnover at 16% according to the December 2022 edition of the Domestic and Foreign Portfolio Investment Report of the Exchange. Analysts have commented that this is in due part a result of unimpressive yield in fixed-income securities, pushing investors to buy up fundamentally strong stocks with attractive dividend yields.

Historically, the market has typically experienced volatility during election season with some notable years, particularly the 1999 election – which saw change from military rule – and 2015 election – which saw the first incumbent defeat at the polls – experiencing declines pre-election. The positive domestic investor sentiment, according to analysts, has been driven mostly by strong earnings releases and dividend payouts announced by companies in the wake of earnings season. However, some have advised cautious trading as the 2023 elections approach but maintained their positive outlook on dividend yields and capital appreciation in bellwether stocks.

An analyst with Parthian Securities, Azeezat Awonuga, whilst commenting on the market with CNBC Africa said that investors are poised to hunt for gains in the stock market as the fixed income yields have moderated in recent times. “As we anticipate earnings from the banking sector which comprises about 60% of the volume in the market and also form the bulk of the fundamentals, positive earnings will push investors to plow more funds into the market,” she stated.

Another investment research analyst from Investment One Capital Management Limited, Akosile Oluwasanmi noted to Channels that uncertainties around the elections and the cash crunch in the economy could dampen investor sentiment into taking profits but positive corporate earnings could also see investors increasing their positions.

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