Nigeria financial markets last week: Domestic equities market sell-offs dominate trading activities… ASI lost 1.4% w/w
The equities market recorded a bearish performance last week due to losses on 4 of 5 trading sessions. Consequently, the benchmark index shed 1.4% to close at 24,826.75 points. As a result, YTD return worsened to –7.5% while investors lost ₦185.7bn as market capitalisation fell to ₦12.95tn. Activity level waned as average volume and value traded fell 23.9% and 18.0% respectively to 210.0m units and ₦2.0bn. In terms of volume, GUARANTY (115.8m units), FBNH (97.4m units) and FCMB (95.6m units) led the chart while GUARANTY (₦2.7bn), ZENITH (₦1.0bn) and MTNN (₦907.3m) led by value.
Performance across sectors was bearish as 4 of the 6 indices under our coverage declined w/w. The Industrial (+2.2%) and Consumer Goods (+1.8%) indices were the gainers, driven by price appreciation in BUACEMENT (+6.0%), HONEYFLOUR (+17.4%) and NESTLE (+10.0%). On the flip side, the Oil & Gas index (-4.9%) led the laggards due to losses in SEPLAT (-10.0%) and JAPAULOIL (-8.0%). Similarly, the Banking (-3.1%) and Insurance indices (-3.1%) trailed on the back of price depreciation in STERLING (-11.1%), ETI (-8.3%), PRESTIGE (-18.6%) and AIICO (-15.3%). Price declines in MTNN (-1.6%) and TRIPPLEG (-8.6%) pushed the AFR-ICT index (-0.9%) lower.
Investor sentiment as measured by market breadth (advance/decline ratio) declined to 0.3x from 1.1x recorded the previous week as 13 tickers gained against 45 that declined. HONEYFLOUR (+17.4%), NESTLE (+10.0%) and CUTIX (+10.0%) led the gainers while NEIMETH (-40.1%), NPRMCRFBK (-25.1%) and PRESTIGE (-18.6%) led the decliners. Although we are not optimistic of a rebound in market performance in the coming week due to poor investor sentiment, current stock prices are attractive for bargain hunting.
Foreign Exchange Market: Oil Price Trends Higher; Naira Declines across Segments
Oil demand continued to rebound, supporting an increase in Brent Crude oil price by 7.3% w/w to US$41.55bbl. However, on the domestic front, the external reserves declined 0.4% w/w to US$36.3 billion (6/18/2020). In the FX market, the CBN spot rate traded flat all week at ₦361.00/US$1.00 while rate declined ₦5.00 at the parallel market to close at ₦455.00/US$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate depreciated ₦0.75 to close at ₦386.50/US$1.00. Similarly, activity level in the I&E Window declined this week as total turnover fell 43.7% to $124.7 million from $221.6 million recorded in the previous week. At the FMDQ Securities Exchange FX Futures Contract Market, the total value of open contracts settled at $14.4 billion, 0.6% (US$86.0m) higher than the prior week. The May 2021 instrument (contract price: ₦419.73) had the most buying interest with additional subscription of US$26.1 million putting the total value at $603.9 million. Meanwhile the July 2020 instrument (contract price: ₦392.75) was the least subscribed with additional subscription worth US$0.5m as the total value settled at $882.1 million. In the coming week, we expect Naira to trade within similar band across the different FX segments.
Money Market: OBB and OVN Trend Higher Despite Elevated System Liquidity
Last week, the OBB and OVN rates opened the week at 5.8% and 6.9% respectively, lower than 8.8% and 9.8% recorded in the previous week as system liquidity increased from ₦184.3 billion to ₦324.7 billion. On Wednesday, the OBB and OVN rate climbed to 8.2% and 8.9% respectively from 6.3% and 7.1% (on Tuesday) but fell on Thursday to 2.8% and 3.7% as system liquidity rose to ₦441.5 billion. Finally, on Friday, OBB and OVN rate advanced to close the week at 15.2% and 16.7% respectively, despite system liquidity rising to ₦977.8 billion.
On Wednesday, the CBN at the primary market auction (PMA) issued 91-day (Offer: ₦2.0bn; Subscription: ₦13.6 billion; Sale: ₦2.0bn), 182-day (Offer: ₦2.0bn; Subscription: ₦15.2bn; Sale: ₦2.0bn) and 364-day (Offer: ₦10.6bn; Subscription: ₦60.2bn; Sale: ₦10.6bn) instruments at a marginal rate of 1.8%, 2.0% and 3.7% respectively compared with previous rates of 2.0%, 2.2% and 4.0%. Demand remained high at the auction as instruments across board were oversubscribed at 6.8x (91-day), 7.6x (182-day) and 5.7x (360-day). On Thursday, following the inflow from OMO maturities worth ₦337.9bn, the CBN conducted OMO auction worth ₦80.0bn to mop-up excess liquidity in the system. Demand at the auction was healthy as the 89-day (Offer: ₦10.0bn; Subscription: ₦20.0bn; Sale: ₦10.0bn), 180-day (Offer: ₦10.0bn; Subscription: ₦24.0bn; Sale: ₦10.0bn) and 348-day (Offer: ₦60.0bn; Subscription: ₦123.5bn; Sale: ₦60.0bn) instruments were oversubscribed by 2.0x, 2.4x and 2.1x with marginal rates of 5.0%, 7.8% and 9.0% respectively.
In the secondary treasury bills market, the performance was bullish as average yield across benchmark tenors trended lower, down 93bps w/w to close at 2.3%. At the close of the week, the short-term instrument enjoyed the most buying interest as yields declined 250bps w/w to 1.8%, trailed by the medium-term instrument falling 30bps w/w to 2.0%. Meanwhile, the long-term instrument closed flat for the week.
Domestic equities market: investors sing bullish chorus in the domestic market
Last week, according to Afrinvest report, the domestic bonds market maintained its gaining streak, recording an average decline of 69bps in yields to close the week at 9.34 per cent. The mid tenor instrument recorded the most buying interest, with average yield dropping 91bps. Nevertheless, the short and long tenor instruments recorded a yield moderation of 66bps and 42bps respectively. Overall, all 19 instruments covered ended the week on a bullish note save the FGN 2022 and 2049 instruments, both of which closed the week flat.
The DMO conducted a bond auction during the week, offering a total of ₦150.0 billion across the 12.75 per cent FGN APR 2023 (₦40.00bn), 12.50 per cent FGN MAR 2035 (₦50.00bn) and 12.98 per cent FGN MAR 2050 (₦60.00bn) instruments. Overall, the auction was oversubscribed at a bid to offer ratio of 3.6x. The longer dated instrument recorded the most subscription at a bid to offer ratio of 4.7x, indicating investor’s strong desire to lock in higher yields. The short and mid-dated bond instruments also recorded strong bid to offer ratios of 3.4x and 2.5x respectively. The DMO allotted a total of ₦100.0 billion across the short-dated (₦32.99bn), mid term (₦16.22bn) and long-dated (₦50.79bn) instruments. Meanwhile, marginal rates closed lower at 8.00 per cent, 11.00 per cent and 12.15% from 9.20%, 11.70% and 12.60% for the short, mid and long term instruments.
In the SSA Eurobonds segment, performance remained upbeat as all 31 instruments that we cover closed the week bullish, with average yield shrinking 70bps lower to settle at 9.0%. The ZAMBIA 2024 and 2022 instruments recorded the most outstanding performance as the respective yields fell 3.86% and 5.82% to close the week at 30.00% and 38.60%. The two were trailed by the ZAMBIAN 2027 and SENEGAL 2021 instrument which fell 2.45% and 1.52% w/w to settle at 22.8% and 4.3% in that order. At the African Corporate Eurobonds market, performance was also bullish as 14 of 20 instrument recorded gains over the week. Overall, average yield for the instruments closed the week 12bps lower to settle at 6.3%. The best performing asset was SEPLAT 2023, which saw a yield decline of 74bps w/w to 9.0%. The instrument was trailed by UBA 2022 and ZENITH 2022 with a yield decline of 39bps w/w apiece to close at 7.4% and 7.3%. Conversely, the BAYPORT 2022 and SIBANYE GOLD 2023 were the top losers as their yields rose 14bps and 34bps w/w respectively to 18.4% and -7.2%. Next week, we expect investors to take profit following a long streak of gains across the bond segments.
