Nigerian Equities Records Second Consecutive Session Gain on Bargain Hunting in Value Stocks

5/10/2017/Cordros Research

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EQUITIES

  • The equities market closed positive for the second consecutive session, reversing the week’s net loss of 0.23%, as the ASI appreciated by 1.17% to 35,773.98 points, following bargain hunting in value stocks.
  • Today’s performance swung the Month-to-Date return (+0.95%) into the green while the Year-to-Date gain improved to 33.11%.
  • The Industrial Goods (+2.80%) index recorded the largest positive return, followed by the Banking (+0.78%) and Consumer Goods (+0.51%) indices, driven by demand for DANGCEM (+2.38%), WAPCO (+4.00%), ZENITHBANK (+1.15%), GUARANTY (+0.63%), NB (+1.24%), and NESTLE (+0.25%) shares, respectively. On the flip side, the Oil & Gas (-0.42%) index turned negative, while the Insurance (-0.41%) index followed suit, owing to losses recorded by MOBIL (-4.87%), MRS (-4.97%), CONTINSURE (-4.90%), and LAWUNION (-4.30%) shares, respectively.
  • Market breadth remained positive with 31 gainers and 14 losers, led by LINKASSURE (+8.70%) and CADBURY (-5.00%). Total volume traded increased by 82.36% to 317 million units, valued at N2.85 billion, and exchanged in 3,327 deals. Notable crossings include DANGCEM (385,000 units at N210.05), GUARANTY (6.2 million units at N40.13), ACCESS (9 million units at N9.70), UBA (21 million units at N9.00) and SKYEBANK (90 million units at N0.51).
  • We expect gains to extend in tomorrow’s session, as investors continue to hunt bargains — taking position ahead of the Q3 earnings season. 

CURRENCY

  • At the time of writing, the CBN USD/NGN spot rate had appreciated by 0.02% to N305.65. Reactions were slightly mixed in the interbank space, as the NGN weakened against the Bloomberg’s referenced USD (-0.31%) and EUR (-0.04%) to N361.10 and N423.59, respectively, while it strengthened against the GBP (+0.64%) to N474.77. The parallel market was broadly quiet, as the naira closed flat against all the currencies we track – USD, GBP and EUR – to close at N363, N480 and N421, respectively. Meanwhile, in the I&E window, the FMDQ’s quoted USD/NGN appreciated by 0.04% to N360.33.

FIXED INCOME AND MONEY MARKET

  • The overnight money market rate contracted for the eighth consecutive session by 217 bps to 7.92%, following inflow via matured OMO bills worth N283.41 billion. In an attempt to subdue the impact of the inflow, the CBN sold N222.82 billion worth of OMO bills at today’s auction – comprising N8.10 billion (vs N50 billion offered) of the 105-day and N214.72 billion (vs N100 billion offered) of the 189-day bills at respective stop rates of 16.00% and 17.90%. Notably, the longer tenured bill remained the toast of investor, as the 189-day bill was 2.15x oversubscribed.
  • Investors in the treasury bills market remained upbeat, partly attributable to the increase in system liquidity following today’s inflow (mentioned above), with average yield contracting by 13 bps to 16.89%. Yields contracted across all ends of the curve – short (-10 bps), mid (-18 bps), and long (-12bs) — to 17.31%, 16.81%, and 16.66%, respectively, with notable bills being the 21-Dec-17 (-60 bps), 5-Apr-18 (-94 bps), and 21-Jun-18 (-139 bps).
  • Similarly, activities in the bond space remained bullish, as average yield contracted by a modest 1 bp to 15.03%. Yields contracted at the short (-4 bps) and long (-3 bps) ends of the curve to 15.35% and 14.99%, respectively, owing to interest in the 30-MAY-2018 (-77 bps) and 14-MAR-2024 (-90 bps) bonds. Meanwhile, yield at the mid (+5 bps) segment expanded to 14.74%, following a selloff of the 15-JUL-2021 (+39 bps) bond.

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