Last week, the equities market closed lower as bearish sentiment resurfaced. The All-Share Index slipped 5bps w/w to 25,591.95 points due to sell-offs in ZENITH (-1.1%), SEPLAT (-2.5%) and DANGSUGAR (-3.6%). Consequently, investors lost ₦7.1bn as market capitalisation fell to ₦13.4tn while YTD loss worsened to -4.7%. Activity level waned as average volume and value traded decreased 44.7% and 1.1% to 244.5m units and ₦2.2bn respectively. The most traded stocks by volume were ZENITH (125.9m units), UBA (104.4m units) and FBNH (101.6m units) while ZENITH (₦2.1bn), GUARANTY (₦1.2bn) and MTNN (₦718.3m) led by value.
Performance across sectors was unimpressive as 4 of 6 indices under our coverage recorded losses. The Industrial Goods and AFR-ICT indices advanced 0.4% and 0.9% w/w respectively, driven by gains in WAPCO (+6.7%) and MTNN (+1.2%). Conversely, the Banking and Oil & Gas indices led decliners, losing 2.7% and 1.3% w/w respectively on the back of losses in UBA (-3.9%), ZENITH (-1.1%) and SEPLAT (-2.5%). Similarly, the Insurance and Consumer Goods indices shed 0.7% and 0.3% w/w respectively due to sell-pressures in CORNERSTONE (-1.5%), DANGSUGAR (-3.6%) and VITAFOAM (-4.9%).
Investor sentiment as measured by market breadth (advance/decline ratio) weakened to 0.7x from the 2.2x recorded last week as 23 stocks gained against the 35 that lost. ETERNA (+28.8%), CILEASING (+11.1%) and NEM (+8.7%) were the best-performing stocks while ROYALEX (-15.2%), LIVESTOCK (-10.6%) and ARBICO (-9.6%) led the underperformers. In the coming week, we expect the bearish momentum to persist in the absence of any major catalyst.
Foreign Exchange Market: Naira Weakens Despite FX Sales Resumption
Last week, Brent crude oil price declined 9.5% w/w to $40.5/bbl due to demand worries, higher inventory build up and the second-wave of the coronavirus outbreaks. We expect these factors to drive discussions at the next OPEC meeting on September 17, 2020. On the domestic front, the external reserves balance declined 1.3% w/w to $35.2bn (9/9/2020). The CBN spot rate remained flat over the week at ₦379.00/$1.00. At the parallel market, Naira depreciated by ₦5.00 to close at ₦445.00/$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate gained 13kobo to close at ₦386.00/ $1.00. Activity level in the I&E Window increased by 11.7% to $240.8m from the $215.6m recorded in the previous week. The total value of open contracts at the FMDQ Securities Exchange (SE) FX Futures Contract Market appreciated marginally by 0.5% ($62.9m) to $12.52bn. The SEPT 2021 instrument (contract price: ₦423.90) received the highest subscription for the second consecutive week, up 21.0% ($70.0m) for a total value of $115.1m. On the other hand, the JULY 2021 instrument (contract price: ₦417.96) recorded the least subscription at $1.0m with a total value of $121.95bn. We expect rates to remain range-bound across the different segments of the market in the week ahead.
Money Market: Bullish Outing in the Secondary T-bills Segment
OBB and OVN rates opened the week at 1.4% and 2.3% respectively from last week’s close of 1.6% and 2.3% as system liquidity fell to ₦737.7bn. On Wednesday, OBB and OVN rates rose to 1.5% and 2.4% respectively as system liquidity decreased to ₦480.9bn. By the close of the week, OBB and OVN rates surged to 14.5% and 16.5% respectively as system liquidity settled at ₦632.0bn. In line with its schedule, the CBN conducted T-bills sales worth ₦128.1bn on Wednesday, ₦20.0m lower than same day’s maturity. Demand was strong across broad with bid-to-cover ratio of 2.0x, 1.6x and 2.1x for the 91, 182 and 364-day instruments respectively. Stop rates continues to dip at 1.1%, 1.6% and 3.1% (vs 1.2%, 1.8% and 3.3% in the previous auction) for the 91-day, 182-day and 364-day instruments respectively.
On Thursday, the CBN auctioned OMO instruments worth ₦70.0bn, lower than same day’s maturity of ₦247.4bn. Demand was strong as the 75-day (Offer: ₦10.0bn; Subscription: ₦12.0bn; Sale: ₦10.0bn), 180-day (Offer: ₦10.0bn; Subscription: ₦35.3bn; Sale: ₦10.0bn) and 355-day (Offer: ₦50.0bn; Subscription: ₦216.8bn; Sale: ₦50.0bn) instruments were oversubscribed at 1.2x, 3.5x and 4.3x with marginal rates of 4.9%, 7.7% and 8.9% respectively. In the secondary T-bills market, there was a bullish outing as average rate declined 17bps w/w to 1.8%. Investors sold-off the 91- day instrument resulting in rates advancing 38bps while the 182 and 364-day instruments saw high demand as the yields dropped 30bps and 59bps respectively. Next week, we expect a robust system liquidity following OMO maturities worth ₦348.3bn and ₦142.1bn from bond coupon payment. Accordingly, we expect rates to trend lower.
Bonds Market: Domestic Bonds Record Bullish Performance
The domestic bonds market ended last week on a bullish note as average yield fell 42bps to 7.5% following buying interest on all trading days. The bullish sentiment was driven by demand from investors seeking to take position ahead of the bond coupon payment amounting to ₦191.7bn in the following weeks. The short-term instrument recorded the most buying interest as average yield declined 1.2% w/w. Trailing, average yield on the long and medium-term instruments dipped 22bps and 11bps w/w respectively. Across the SSA Eurobonds space, sell pressures dragged performance and average yield rose 15bps w/w to 8.3%. The NIGERIAN 2027, GHANA 2022 and GABON 2024 instruments recorded the most sell-offs as the respective yields increased 33bps w/w. Trailing, yields on the NIGERIAN 2038 and 2047 instruments rose 32bps and 30bps w/w respectively. At the African Corporate Eurobonds market under our coverage, performance was positive as average yield dipped 14bps w/w to 4.5%. The SIBANYE GOLD 2023 and GROWTHPOINT PROPERTIES LIMITED 2023 instruments posted a bullish performance as yields declined 220bps and 34bps w/w respectively. In the coming week, we expect to see a bullish performance in the domestic market as investors reinvest inflows from bond coupon.