Home Finance Domestic Equities Market: Off to a Bearish Start in 2021, ASI down 0.4% w/w

Domestic Equities Market: Off to a Bearish Start in 2021, ASI down 0.4% w/w

by Business News Report

The domestic equities market opened the first week of the year on a bearish note as the All-Share index was down 0.4 per cent w/w to settle at 40,120.22 points. The negative performance was on the back of losses in DANGCEM (-8.1%), MTNN (-2.8%) and OANDO (-4.1%). Consequently, market capitalisation declined by ₦78.7bn to close the week at ₦21.0tn while YTD return stood at -0.4%. Activity level varied as average volume climbed 32.7% to 678.8m units while value fell 54.1% to ₦4.0bn. The most traded stocks by volume were TRANSCORP (107.0m units), AIICO (97.2m units) and ACCESS (69.3m units) while ZENITH (₦1.7bn), GUARANTY (₦1.3bn) and NIGERIAN BREWERIES (₦780.0m) led the value chart.

Performance was bullish across sectors as 4 of 6 indicators that we track closed in the green, save the Industrial Goods and AFR-ICT indices which lost 0.6% and 0.5% w/w respectively due to losses in DANGCEM (-8.1%) and MTNN (-2.8%). Conversely, the Oil & Gas and Insurance indicators were the best performers, up 13.2% and 9.5% w/w respectively, buoyed by buying interest in SEPLAT (+23.3%) and NEM (+28.5%). Lastly, the Banking and Consumer Goods indices closed 3.2% and 2.6% higher w/w respectively on the back of gains in ZENITH (+3.4%), GUARANTY (+2.0%) and INTBREW (+16.0%). 

Investor sentiment as measured by market breadth (advance/decline ratio) strengthened to 2.2x from 0.9x recorded last week as 47 tickers gained against 21 losers. BOCGAS (+32.2%), NEM (+28.5%) and SEPLAT (+23.3%) led the top gainers while DEAPCAP (-12.0%), ROYALEX (-11.5%) and DANGCEM (-8.1%) led the decliners. We expect to see bargain hunting in the coming week.

Foreign exchange market: Vaccine hopes spark optimism in the oil market

Following optimism for the distribution of vaccines across the world, Brent continues to gain positive momentum as it advanced 5.0% w/w to $54.4/bbl. amid anticipation for increased oil demand globally as inventories are depleted. In the same vein, external reserve balance increased marginally by 1.0% w/w to settle at $35.7bn.  The local currency traded at ₦379.00 at the CBN spot market, unchanged from last week’s close. On the other hand, Naira gained ₦16.75 at the Investors’ & Exporters’ (I&E) Window, settling at ₦393.50/$1.00 at the end of the week. At the parallel market, Naira depreciated by ₦2.00 to close at ₦472.00/$1.00. Activity level in the I&E Window decreased by 73.4% to $141.2m from the previous week.

The total value of open contracts of the naira at the FMDQ Securities Exchange (SE) FX Futures Contract Market rose 2.7% ($215.99m) to close at $8.4bn. The MAY 2021 instrument (contract price: ₦413.14m) recorded the highest subscription of $100.0m which took total value to $924.9m. On the other hand, the AUGUST 2021 instrument (contract price: ₦421.93) received the least subscription worth $0.9m, bringing its total value up to $302.4m. We expect the exchange rates to remain range-bound at the official market and the I&E window.

Money market: Bullish momentum in the secondary market

The interbank rates – OBB and OVN – opened the year higher at 1.0% and 1.5% respectively from the close of 0.5% and 0.8% last year as system liquidity fell to ₦821.1bn. By the end of the week, the rates closed at 8.0% and 9.3% despite an increase in system liquidity to ₦1.1tn.

On Thursday, following the inflow from OMO maturities worth ₦411.0bn, the CBN conducted an OMO auction worth ₦60.0bn to mop-up liquidity in the system. Demand at the auction was robust as the 110-day (Offer: ₦10.0bn; Subscription: ₦57.8bn; Sale: ₦10.0bn), 180-day (Offer: ₦10.0bn; Subscription: ₦81.0bn; Sale: ₦10.0bn) and 362-day (Offer: ₦40.0bn; Subscription: ₦539.81bn; Sale: ₦40.0bn) instruments were oversubscribed by 5.8x, 8.1x and 13.5x at marginal rates of 1.5%, 4.3% and 5.7% respectively. In the secondary market, performance was bullish as average yields across tenors declined 5bps w/w to 0.43%. The 182-day and 364-day instruments traded at lower yields of 0.23% and 0.38% (previous week: 0.38% and 0.72% respectively). Conversely, the 91-day instrument traded flat at 0.38%. In the coming week, we anticipate inflows from maturing OMO instruments worth N211.3bn to shape the movement of rates. However, we expect CBN to keep rates and system liquidity in check through regular auctions.

Bonds Market: Domestic Bonds Market Opens the Year on Bearish Note

The domestic bonds market ended the first trading week of the year on a bearish note, as average yield rose 24bps to 6.3% following sell pressures on 4 of the 5 trading days. Across tenors, the long-term instrument recorded the most sell-offs as yields advanced 38bps w/w. Trailing, the medium-term and short-term instruments rose 21bps and 8bps w/w respectively. Across the SSA Eurobonds space, price appreciation drove performance leading to a bullish outing as average yield fell 6bps w/w to 7.6%. The NIGERIAN 2021, GABON 2024 and NIGERIAN 2027 instruments recorded the most buying interest as yields declined 52bps, 50bps and 39bps w/w respectively. Conversely, yields on the GHANA 2022 and SENEGAL 2021 instruments rose 2.7% and 0.9% w/w respectively.

At the African Corporate Eurobonds market under our coverage, performance was positive as average yield dipped 1.4% w/w to 4.6%. The ESKOM HOLDINGS 2021 and ACCESS BANK 2021 instruments posted a bullish performance as yields declined 21.5% and 2.7% w/w respectively. On the other hand, the NEERG ENERGY 2022 and OFFICE CHERIFIEN 2024 instruments recorded a sell-off as yields rose 93bps and 15bps w/w respectively. In the coming week, we expect yields to fall at the domestic bond market while in the Eurobond markets, we expect performance to be positive as yields remain attractive.

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