August 10, 2018
By Yakubu LAAH InvestAdvocate
Lagos (INVESTADVOCATE)-The Nigerian Stock Exchange all-share index (NSEASI) on Friday closed the week’s trading session in negative territory as it sheds -2.89 percent to close at 35,446.47 points – lowest since October 2017, according to Cordros weekly report.
The report says with this trend, Month-to-date and Year-to-date losses also increased, to -4.24 percent and -7.31 percent, respectively.
According to Cordros, all sectoral indices closed negative, with the Industrial Goods (-4.42 percent) index posting the largest loss, following a significant loss in the shares of cement manufacturer and most capitalised company on the Nigerian bourse, Dangote Cement Plc, which largely led to the significant loss in Friday’s session.
Cordros reports the Banking index was down 1.35 percent from the previous week, despite the attractive dividends, of 30 kobo apiece, declared by top tier lenders, Guaranty Trust Bank Plc and Zenith Bank Plc. Market breadth was negative, with 24 losers and 21 gainers respectively.
“In the short to medium term, selloffs are likely to persist in the absence of a near-term positive trigger, and amidst brewing political concerns. However, macroeconomic fundamentals remain stable and supportive of recovery in the long term,” the Cordros report affirmed.
On the global markets, the report says proceedings were mixed, as sentiments in the United States were negative with the DJIA and S&P 500 indices closing lower by 0.62 percent and 0.26 percent respectively, while returns in Asia (CSI 300: +2.71 percent, Nikkei 225: -1.01 percent) and the Euro area (FSE 100: +0.29 percent, Euro Stoxx 50: -1.74 percent) were mixed.
“Fresh trade war concerns, corporate earnings, other corporate updates and declining oil prices were major contributing factors,” the report added.
Investors in the emerging markets (MSCI EM: +0.50 percent) closed the week positive, as resurfaced gains in China and still-positive sentiments in India (+0.83 percent), offset the loss in Brazil (-5.50 percent). Meanwhile, the MSCI FM index (-1.27 percent) remained in negative territory, owing to losses in Nigeria (-2.89 percent) and other regions, which outweighed the gains in Morocco (+0.17 percent) and Kenya (+0.98 percent), Cordros reports.
On the domestic scene, activities in the treasury bills market were bearish, as lower system liquidity weighed on sentiments. Consequently, average yield rose 19 bps to 11.99 percent.
Cordros says investor sentiment was negative across the short (+28 bps) and mid (+27 bps) ends of the curve, amid selloffs of the 55DTM (+81 bps) and 111DTM (+46 bps bills. Conversely, demand for the 237DTM (-27 bps) bill led to yield contraction at the long (-4 bps) segment.
“In the coming week, we expect a reversal in the bearish trend, on the back of anticipated healthy liquidity. At the NTB auction scheduled for Wednesday, the CBN will offer NGN33.38 billion – NGN3.38 billion of the 91-day, NGN10.00 billion of the 182-day, and NGN20.00 billion of the 364-day – worth of bills to the market,” the report affirmed.
Also, trading in the bond market was bearish, amidst selloffs by foreign investors, with increasing political tensions, ahead of the 2019 general elections, weighing heavily on investor sentiments. As a result, average yield rose 23 bps, w/w, to 14.09 percent.
Cordros reports that selloffs of the FEB-2020 (+64 bps), MAR-2027 (+48 bps) and MAR-2036 (+26 bps) bonds led to yield expansion at the short (+27 bps), mid (+23 bps), and long (+16 bps) ends of the curve, respectively.
“We expect yields to take a cue from primary auction stop rates in the coming week. However, we reiterate our expectation for modestly higher yields in the medium term, anchored on (1) domestic monetary policy direction, (2) capital flight amid higher yields in safe haven assets, (3) political uncertainty stemming from the upcoming general elections, and (4) government borrowing to fund the 2018 budget. At the FGN bond auction scheduled for Wednesday, 15th August 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 report said.