Despite four consecutive losses during the week, the Nigerian Equities market closed on a bullish note as buying interest in AIRTELAF (+10.0%), ABCTRANS (+9.8%) and NESTLE (+9.6%) supported overall performance. Consequently, the NSE All-Share Index closed in the green, rising 1bp w/w to settle at 24,829.02 points. Similarly, YTD return moderated to -7.5% and market capitalisation rose ₦1.2 billion w/w to close at ₦13.0 trillion. Activity level waned as average volume and value traded declined 29.6% and 15.4% to 147.9m units and ₦1.7bn respectively. The top traded stocks by volume were FBNH (78.2m units), GUARANTY (70.4m units) and ZENITH (62.8m units) while GUARANTY (₦1.6bn), ZENITH (₦1.0bn) and DANGCEM (₦946.4m) led by value.
Performance across sectors was bearish as 5 of the 6 indices covered trended southward w/w. The Oil & Gas index led laggards, down 4.8% on the back of sell pressures in SEPLAT (-10.0%), ARDOVA (-5.1%) and OANDO (-4.0%). Trailing, the Industrial Goods and Insurance indices shed 2.0% and 1.6% respectively on account of losses in CUTIX (-9.1%), BUACEMENT (-2.3%), PRESTIGE (-17.5%) and LINKASSURE (-9.4%). Similarly, the Banking and Consumer Goods indices lost 0.5% and 1bps respectively as investors exited positions in ACCESS (-2.2%), GUARANTY (-1.9%), DANGSUGAR (-16.8%) and GUINNESS (-11.8%). Conversely, the AFR-ICT index was the lone gainer, up 4.9% as AIRTELAF (+10.0%) and MTNN (+1.2%) buoyed performance.
Investor sentiment as measured by market breadth (advance/decline ratio) strengthened to 0.4x from 0.3x as 18 stocks advanced against 43 that declined. The top performing stocks for the week were AIRTELAF (+10.0%), ABCTRANS (+9.8%) and NESTLE (+9.6%) while PZ (-21.4%), GLAXOSMITH (-17.6%) and PRESTIGE (-17.5%) were the laggards. In the coming week, we expect to see sustained profit-taking in early trades, however, we believe this negative trend would be reversed before the end of the week on account of bargain hunting by investors.
Foreign Exchange Market: Naira remains stable despite marginal decline in oil prices
Oil prices fell this week, declining 3.6% w/w to $40.61/bbl. as the surge in COVID-19 cases to 9.4 million from 8.5 million last week affected the reopening of economies. On the domestic front, the external reserves moderated 0.3% w/w to $36.2 billion (25/6/2020). The CBN spot rate closed flat at ₦361/$1.00. At the parallel market, Naira depreciated ₦4.00 to close at ₦457.00/$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate appreciated 17kobo to settle at ₦386.33/ $1.00. Activity level in the I&E Window surged 138.3% to $297.2m from $124.7m recorded in the previous week.
The total value of open contracts of the Naira at the FMDQ Securities Exchange (SE) FX Futures Contract Market declined 9.2% ($605.5m) to $13.1 billion as the JUNE 2020 instrument matured during the week. The JULY 2020 instrument (contract price: ₦390.20) received the highest subscription of $383.14m which took total value to $1.3 billion. On the other hand, the APR 2021 instrument (contract price: ₦414.82) recorded the least subscription of $2.0m for a total value of $473.2m. We expect exchange rates to remain range-bound across the different segments of the market in the coming week as investors await the resumption of FX sales by the apex bank.
Money Market: Secondary T-bills Market Sheds Gain
Despite the moderation in system liquidity to ₦70.1 billion from ₦617.8 billion the previous week, the OBB and OVN rates opened last week lower at 14.50% and 15.75% from 15.17% and 16.67% respectively recorded at the close of last week. On Wednesday, system liquidity declined further to settle at ₦29.4 billion from ₦42.2 billion in the previous day. Nevertheless, the OBB rate remained flat at 14.67% while OVN inched higher to 15.75% from 15.67% on Tuesday. On Thursday, system liquidity fell to ₦7.2 billion while the OBB and OVN rates printed higher at 15.83% and 16.92% respectively. The week closed with the OBB and OVN rates settling lower at 15.0% and 16.10% respectively as system liquidity rose to ₦30.9 billion.
In the secondary treasury bills market, there was a bearish performance as average yield jumped 28bps to close the week at 2.57%. Although the 364-day instrument traded flat all week at 3.00%, the 91 and 182 days instruments saw sell-offs as their respective yield rose 17bps and 67bps respectively to close the week at 2.00% and 2.67%. Due to the very low system liquidity and the absence of maturing instruments this week, there was no auction by the apex bank. We expect high system liquidity in the coming week due to maturing T-bills and OMO instruments worth ₦88.9 billion and ₦157.2 billion respectively to keep money market rates low.
Bonds Market: The Bulls maintain dominance
The domestic bond market closed the week bullish as average yield declined 57bps w/w to settle at 8.8% following gains on 4 of 5 trading sessions. Demand was strong across tenors with all instruments under our coverage recording gains w/w. The short-dated bonds enjoyed the highest demand as average yield declined 88bps w/w while the long-term bonds and medium-term bonds fell 66bps and 31bps respectively. The bullish performance in the SSA Eurobonds space persisted as average yield plunged 10bps w/w. The ZAMBIA 2022 and 2024 instruments saw the strongest decline, down 124bps and 94bps respectively. The Senegal 2027 and Nigeria 2022 instruments trailed, shedding 56bps and 22bps w/w respectively. Meanwhile, the South Africa 2041 and 2024 instruments rose 15bps and 13bps w/w respectively as investors took into account the country’s current economic crisis.
The bullish streak in the African Corporate Eurobonds market was sustained as 15 of 20 tickers under our coverage gained w/w. Consequently, average yield dipped 20bps w/w to settle at 6.1%. The BAYPORT MANAGEMENT 2022 and TRANSNET 2022 instruments led the pack with a 339bps and 43bps drop in yield. Conversely, ESKOM HOLDINGS 2021 and UBA 2022 rose 12bps and 9bps w/w respectively. In the coming week, we expect a bullish performance as investors sustain interest.
