Nigerian Equities Market Extends Bearish Run Third Straight Week

July 20, 2018

By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-The Nigerian equities market on Friday extended its bearish run for the third consecutive week, as the all-share index (ASI) shed 2.11 percent week-on-week (w/w), to close at 36,603.44 points, amid persisting negative sentiments.

Cordros weekly market update reports that four of the five sessions for the week closed in the red, as the Month-to-Date and Year-to-Date losses rose to 4.38 percent and 4.29 percent respectively.

The report says activities picked up during the week, as total volume of trades jumped 37.50 percent to 1.66 billion units, valued at N14.83 billion (-14.40 percent).

According to Cordros, most sector indices closed lower – Consumer Goods (-3.72 percent), Banking (-3.59 percent), Industrial Goods (-3.26 percent), and Oil & Gas (-2.22 percent) – save for the Insurance (+0.08 percent) index.

Market breadth was negative, with 54 losers compared to 16 gainers, respectively, the losers were led by Union Diagnostic & Clinical Services Plc with a loss of -34.29 percent; while insurer, Linkage Assurance Plc emerged the topmost gainer with a gain of +9.72 percent.

“In our view, selloffs are likely to persist in the short to medium term, in the absence of a positive one-off catalyst. However, likelihood of gains in the long term remain supported by still-positive macroeconomic fundamentals,” the Cordros report affirmed. 

On treasury bills, the weekly update reports that activities in the market were bullish, with sentiments supported by relatively healthy system liquidity.

Consequently, average yield fell 32 bps to 11.87 percent as investor sentiment was positive across the short (-54 bps), mid (-33 bps), and long (-18 bps) ends of the curve, amid increased demand for the 76DTM (-102 bps), 132DTM (-132 bps), and 195DTM (-46 bps) bills, respectively.

According to the report, at this week’s primary market auction, N107.05 billion worth of bills were sold, compared to an offering of N178.41 billion. N5.85 billion, N26.60 billion, and N74.60 billion of the 91-day, 182-day, and 364-day bills allotted at respective stop rates of 10 percent (previously 10 percent), 10.5 percent (previously 10.5 percent), and 11.49 percent (previously 11.5096 percent).

“In the coming week, we expect the bullish trend to persist, on the back of anticipated healthy liquidity,” the report added.

In terms of bond, trading in the market were mixed, albeit with a bullish tilt, as positive sentiments, amid healthy liquidity, were tapered by the release of the Q3-18 bond issuance calendar and bond offer circular for July, Cordros reports.

The report says in line with expectations of increased government borrowing to fund the 2018 budget, the calendar indicates an increased offer amount of N270 billion (vs. N220 billion in Q2-2018 but still less than the N405 billion in Q3-2017) – strengthening the case for higher yields in the medium term.

As a result, average yield fell by 3 bps, w/w, to 13.85 percent. Demand for the JUN-2019 (-83 bps) bond led to yield contraction at the short (-16 bps) end of the curve. Conversely, yields expanded at the mid (+5 bps), and long (+2 bps) segments, with the JAN-2026 (+14 bps), and MAR-2036 (+9 bps) bonds recording the most significant expansions, respectively.

“We expect yields to take a cue from auction stop rates in the coming week. However, we reiterate our expectation for modestly higher yields in the medium term, anchored on (1) weakening signs of monetary easing, (2) capital flight amid higher yields in safe haven assets, (3) political uncertainty stemming from the upcoming elections, and (4) increased government borrowing to fund the 2018 budget. At the FGN bond auction scheduled for Wednesday, 25th July 2018, the DMO plans to offer NGN90 billion – NGN25 billion of the APR-2023 (re-opening), NGN25 billion of the MAR-2025 (re-opening), and NGN40 billion of the FEB 2028 (re-opening) – in bonds to investors,” the weekly update affirmed.

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