Despite three consecutive days of gains during the week, the local bourse halted its bullish streak as profit-taking in BUACEMENT (-4.8%), STANBIC (-7.3%) and UBN (-8.2%) weighed on overall performance. Consequently, the NSE All-Share Index closed in the red, falling 1.0% w/w to settle at 25,016.30 points. Similarly, YTD return fell to 6.8% and market capitalisation shed ₦118.4bn w/w to close at ₦13.0tn. Activity level was mixed as average volume declined 29.8% to 293.8m units while value traded rose 4.7% to ₦4.7bn. The top traded stocks by volume were FBNH (175.9m units), GUARANTY (154.9m units) and ZENITH (125.8m units) while DANGCEM (₦6.3bn), NIGERIAN BREWERIES (₦5.1bn) and GUARANTY (₦3.8bn) led by value.
Performance across sectors was bearish as 4 of 6 indices under our coverage trended southward w/w. The Industrial Goods index led laggards, down 3.1% on the back of sell pressures in CUTIX (-9.6%), BUACEMENT (-4.8%) and WAPCO (-0.4%). Trailing, the Banking index shed 1.8% on account of losses in UBN (-8.2%), STANBIC (-7.3%) and STERLNBANK (-7.2%). Similarly, the Oil & Gas and Insurance indices lost 1.3% and 0.7% respectively as investors exited positions in TOTAL (-6.5%), MANSARD (-8.9%) and WAPIC (-6.3%). Conversely, the Consumer Goods index led gainers, up 0.3% as DANGSUGAR (+15.9%) and NASCON (+3.6%) buoyed performance while gains in CHAMS (+12.5%) and COURTVILLE (+5.0%) marginally drove the AFR-ICT index 3bps higher.
Investor sentiment as measured by market breadth (advance/decline ratio) weakened to 0.6x from 1.6x as 25 stocks advanced against 39 that declined. The top performing stocks for the week were NEIMETH (+56.6%), JAPAULOIL (+50.0%) and UAC-PROP (+20.0%) while AFROMEDIA (-23.1%), JBERGER (-22.7%) and UACN (-13.9%) were the laggards. We expect to see profit-taking activities in early trades next week but overall, we expect a mixed performance.
Foreign Exchange Market: Naira Maintains Stability as Foreign Reserves Rebound
This week, sentiment in the global oil market was mixed, partly fueled by news surrounding non-compliance in production cut by some OPEC+ member countries (such as Iraq and Nigeria) on one hand, and sustained recovery in demand for oil globally. On the demand side, China, one of the largest consumer of oil, increased its import by 13.0% to 11.1mb/d in May as economic activities neared pre-COVID level. Consequently, Brent crude price appreciated 16.0% w/w to close at $42.05/bbl, the highest since March 2020. Elsewhere, the Nigerian foreign reserves sustained its uptrend, climbing 0.4% ($175.9m) to $36.6bn (3/06/2020).
This week, the naira traded within similar bands as the CBN Spot rate closed the week flat at ₦361.00/$1.00. At the parallel market, the naira appreciated ₦6.00 to close at ₦447.00/$1.00 for the week. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate depreciated ₦0.17 to settle at ₦386.50/$1.00. Activity level in the I&E Window advanced as total turnover surged 73.4% w/w to $332.2m from $191.5m recorded the previous week.
At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts of the Naira increased to $14.3bn, up $328.9m (2.4%) from $13.9bn in the prior week. The JUN 2020 instrument (contract price: ₦389.84) saw the most buying interest with an additional subscription of $271.9m, taking total value to US$1.9bn. On the other hand, the FEB 2021 instrument (contract price: N411.41) was the least subscribed (+0.1%), with marginal subscription of US$1.5m to gross US$1.5bn. In the coming week, we expect exchange stability in the FX market given the improvement in external reserve.
Money Market: Bearish Outing in the T-Bills Market
OBB and OVN rates opened the week at 2.4% and 3.0% respectively from last week’s close of 2.2% and 3.0% as system liquidity rose to ₦526.6bn. On Thursday, OBB and OVN rates lowered to 1.9% and 2.5% respectively as system liquidity rose to ₦737.9bn following OMO repayment of ₦149.7bn. By the close of the week, OBB and OVN rates rose to 15.6% and 16.7% respectively as system liquidity settled at ₦493.9bn following CBN’s ₦459.7bn CRR debit.
The CBN auctioned OMO instruments worth ₦70.0bn on Thursday, lower than same day’s maturity. Demand was high across broad with bid-to-cover ratio of 2.3x, 2.6x and 6.7x for the 82-day, 173-day and 341-day instruments. This was on the back of foreign investors re-investing maturities as they are unable to repatriate their funds owing to forex rationing by the CBN. Notably, stop rates crashed compared to previous auction at 4.95%, 7.79% and 8.99% (vs 7.00%, 8.75% and 9.90%) for the 82-day, 173-day and 341-day instruments respectively. In the secondary T-bills market, there was a bearish outing as average rate rose 101bps w/w to 3.2%. Investors sold-off the 91-day instrument resulting in rates advancing 304bps while the 182 and 364-day instruments closed flat. Next week, we expect maturities worth ₦92.8bn and ₦90.9m from the OMO and T-bills markets. As such, we expect rates to remain broadly stable.
Bonds Market: Bullish Performance in the Domestic Market
This week, performance in the secondary market was bullish as average yield fell 9bps w/w to 10.0%. Across tenors, the mid-term bonds recorded the most buying interest with yields down by 21bps w/w. The long-term instruments also recorded a 5bps decline in yields while yields rose 3bps at the short end. For the Nigerian Eurobond instruments, performance was bullish as average yield declined 83bps to 7.9%. The 2021 and 2025 instruments enjoyed the highest demand, with yields declining 1.2ppts and 1.1ppts respectively.
For the Nigerian Corporate Eurobonds that we track, the story was similar as average yield declined 204bps w/w to 9.5%. Seplat 2023 instrument led the pack with yield declining 5.3ppts w/w. UBA 2022 and Zenith 2022 also recorded gains as respective yield declined 1.5ppts and 1.1ppts w/w. In the domestic market, we expect a sustained bullish performance in the coming week amid strong demand and low rates in the money market.
