NSE explains 33% ETF market growth
Following a growth of 33 per cent in the annual turnover in the Exchange-Traded Fund market for 2017, the Nigerian Stock Exchange said the growth was due to various initiatives undertaken during the year to support the issuance of market beneficial ETFs.
The NSE’s ETF market witnessed increased activity across key metrics in 2017, recording a 272 per cent year-on-year growth in trade volumes, 33 per cent growth in turnover and a 40 per cent year-on-year increase in market capitalisation to close the year at N6.69bn.
An ETF is a marketable security that tracks an index, a commodity, bonds, or a basket of assets such as an index fund.
Unlike mutual funds, an ETF trades like a stock on the exchange. The ETFs experience price changes throughout the day as they are bought and sold. The ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
Owing to the fact that it trades like a stock, an ETF does not have its net asset value calculated once at the end of every day like a mutual fund does.
The 40 per cent rise in the ETF market capitalisation was buoyed by the listing of the SIAMLETF 40 and share price appreciation, the Exchange explained.
The Vetiva Banking ETF was said to have posted the highest return of 70 per cent, mirroring the gains recorded by the banking sector in the Nigerian equity market.
Generally, the NSE recovered from the macroeconomic overhang of the commodity down cycle to become the third best performing market in 2017 globally, with a 42 per cent return in the NSE All-Share Index.
The NSE attributed this performance parttly to the Central Bank of Nigeria’s monetary policies that resulted in increased liquidity in the foreign exchange market.
Thus, the equity market activity skyrocketed from 2016 levels, as market turnover increased by 121 per cent to N1.27tn from N0.58tn.
The Chief Executive Officer of the NSE, Oscar Onyema, was quoted as saying, “Initial Public Offer activity in the year remained mute, however, there were several other positive indicators including the revival of supplementary listings and the return of new issuances. The value of supplementary listings increased by 27 per cent, bringing the total value of equity issues in 2017 to N408bn.”
With respect to bonds, Onyema said that the NSE fixed income market recorded mixed performance.
He said, “New bond issuances increased over the previous year, while bond yields gradually moderated from 2016 levels amidst easing inflation and greater FX stability. Yields across various tenors declined between 0.4 per cent and 1.5 per cent, and market turnover declined by 24 per cent in 2017, as investors sought higher returns in alternative product classes.
“However, supplementary issuances by the Federal Government saw bond market capitalisation increase by 34 per cent year-on-year.PUNCH.