January 18, 2019
Lagos (INVESTADVOCATE)-The Nigerian equities market on Friday closed the last trading session of the week in green, gaining 1.38 percent and posted a whopping -3.94 percent Week-to-Date (WTD) returns following buying sentiments across bellwether counters.
InvestmentOne reports that market breadth index was somewhat flat with 21 gainers compared to 22 stocks that declined the previous session on the floor of the Nigerian Stock Exchange (NSE).
Cordros weekly report affirmed that the Month-to-Date (MTD) loss is now at a tamer 1.35 percent; as buying sentiments across Nigeria’s most capitalised listed company, Dangote Cement Plc and beverage producer, Nestle Nigeria Plc; both gained +10.11 percent and +3.49 percent respectively Week-on-Week (W/W), the shares of beer maker, Nigerian Breweries Plc also surged by +3.85 percent.
On sectoral breakdown, all sector indices closed positive – save for the Banking index which declined by -1.04 percent, the Industrial sector with a gain of +12.71 percent led the pack, followed closely by the Insurance and Consumer Goods sectors; which appreciated +5.51 percent and +2.72 percent apiece, and Oil & Gas sector grew by +0.59 percent.
“In spite of this week’s rally, our view continues to favour cautious trading pattern in the equities market amidst brewing political jitters ahead 2019 elections, and the absence of a positive market trigger. However, we the positive macroeconomic fundamentals to drive recovery in the long term,” the Cordros report affirmed.
On fixed income and money market, Cordros reports that overnight lending rate moderated by 633 basis points (bps w/w) to 16.17 percent, compared to last week’s close of 22.50 percent.
According to the weekly update, rates remained elevated throughout the week, amidst the Central Bank of Nigeria’s (CBN’s) Open Market Operation (OMO) N574.59 billion interventions. “However, inflows of matured OMO bills (N560.92 billion), treasury bills (N73.45 billion), and bond coupon payments (N106.03 billion) boosted liquidity towards the end of the week, resulting in a rate decline,” the report added.
“Next week, inflows totaling N449.37billion – N381.54 billion in maturing OMO bills and N67.82 billion in bond coupon payments – will offer support to system liquidity. However, liquidity mop-up and forex intervention by the CBN are likely to exert upward pressure on the overnight lending rate,” Cordros affirmed.
The update says activities in the treasury bills market were bullish driven by (1) the increase in system liquidity, and (2) increased demand from foreign investors. Consequently, yields fell 40 bps to close the week at 14.91 percent on average.
It said buy sentiment was concentrated at the short (-128 bps) and mid (-1 bp) segments, amid demand for the 55DTM (-226 bps) and 132DTM (-220 bps) bills, respectively. “Conversely, yield expanded at the long (+4 bps) end of the curve, following a selloff of the 237DTM (+106 bps) closed flat. At this week’s primary action, the CBN fully allotted N225.45 billion worth of bills – N5.85 billion of the 91-day, N26.60 billion of the 182-day and N119.55 billion of the 364-day – at respective stop rates of 11.00 percent (previously 10.899 percent), 13.10 percent (same as previous auction), and 15.00 percent (previously 14.50 percent),” the report noted.
“Yields are expected to be pressured, as the CBN is expected to maintain its aggressive OMO stance,” the it added.
Activities in the bond market were also bullish as market players sought to re-invest coupon payments. As a result, average yield moderated by 6 bps w/w to close at 15.19 percent, Cordros reported.
It affirmed that yield moderated at the mid (-10 bps) and long (-16 bps) segment, following demand for the MAR-2027 (-34 bps) and MAR-2036 (-25 bps) bonds. On the flip side, yields widened at the short (+7 bps) end of the curve following a selloff of the FEB-2020 (+19 bps) bond.
“Demand is likely to persist over the next week as market players seek to reinvest inflows from incoming coupon payments (N67.82 billion). However, theme for the bond market continues to favour modestly higher yields in the medium term, anchored on (1) domestic monetary policy direction, (2) sustained uptick in inflation rate, (3) capital flight amid higher yields in safe haven assets, and (4) political uncertainty stemming from the upcoming general elections,” Cordros added.
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