The equities market sustained last week’s bullish run as the All-Share index gained 0.6% w/w to 25,199.84 points, due to buying interest in AIRTELAF, GUARANTY and MTNN. Consequently, investors’ value appreciated ₦82.5bn as market capitalisation rose to ₦13.1tn while YTD return settled at -6.1%. Activity level improved as average volume and value traded advanced 24.5% and 29.0% to 482.4m units and ₦4.5bn respectively. The most traded stocks by volume were GUARANTY (122.0m units), TRANSCORP (113.4m units) and ACCESS (63.7m units) while GUARANTY (₦3.0bn), ZENITH (₦1.1bn) and DANGCEM (₦562.2m) led by value.
Performance across sectors was impressive w/w as 4 of 6 indices under our coverage gained . The Oil & Gas and AFR-ICT indices gained 5.9% and 4.7% respectively, following price accretion in SEPLAT, OANDO, MTNN and AIRTELAF. Similarly, buying interest in CADBURY (+12.9%), NIGERIAN BREWERIES, CORNERSTONE and LASACO buoyed performance in the Consumer Goods and Insurance indices. Conversely, sell pressures in DANGCEM, UNITYBANK and ETI compelled a 2.7% and 3bps loss in the Industrial Goods and Banking indices respectively.
Investor sentiment as measured by market breadth (advance/decline ratio) declined to 0.9x from 2.7x last week as 28 stocks gained against the 30 that declined. CADBURY, NIGERIAN BREWERIES and UNILEVER led the top gainers while CHAMPION, IKEJAHOTEL and NNFM led the decliners. In the coming week, we anticipate a mixed performance as investors take profit while seeking bargain hunting opportunities.
Naira stable across segments of foreign exchange market
Oil demand continues to rebound to pre COVID-19 levels globally. Nevertheless, oil price declined 0.3% w/w to $44.96bbl (8/14/2020). Similarly, on the domestic front, the external reserves declined 0.2% w/w to $35.6bn (8/12/2020) despite no FX sales during the week. In the FX market, the CBN spot rate traded flat all week at ₦381.00/US$1.00 while rate at the parallel market closed flat w/w at ₦475.00.00/$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate closed flat at ₦386.00/$1.00. Similarly, activity level in the I&E Window declined this week as total turnover increased 7.5% to US$191.2m from US$177.9m recorded in the previous week.
At the FMDQ Securities Exchange FX Futures Contract Market, the total value of open contracts settled at $12.9bn, up 0.2% ($23.4m) from the prior week. The July 2021 instrument (contract price: ₦418.27) had the most demand with additional subscription of $4.0m putting the total value at $69.0m. Meanwhile the August 2020 instrument (contract price: ₦388.69) saw sell-off worth $30.2m as the total value settled at $1.6bn. In the coming week, we expect the Naira to trade within a similar band across the different FX segments.
Rates Trend Lower in the Secondary Money Market
This week, the OBB and OVN rates opened the week lower at 5.3% and 6.1% respectively from last week’s close of 6.3% and 7.2% even as system liquidity settled at ₦182.1bn. However, both the OBB and OVN rates declined to 4.3% and 5.3% respectively on Wednesday while system liquidity plunged to ₦177.8bn. At the close of the week, the OBB and OVN rates printed at 17.6% and 19.8% respectively with system liquidity settling at c.₦220.7bn.
On Wednesday, the CBN at the primary market auction (PMA) issued 91-day (Offer: ₦19.8bn; Subscription: ₦30.61bn; Sale: ₦19.8bn), 182-day (Offer: ₦10.0bn; Subscription: ₦31.11bn; Sale: ₦10.0bn) and 364-day (Offer: ₦27.0bn; Subscription: ₦56.5bn; Sale: ₦27.0bn) instruments. The bills were issued at marginal rates of 1.20%, 1.39% and 3.19% (vs. 1.20%, 1.50% and 3.40% in the previous week) for the 91-day, 182-day and 364-day tenors respectively. Demand remained strong at the auction as instruments across board were oversubscribed at 1.6x (91-day), 3.1x (182-day) and 2.1x (364-day).
On Thursday, the CBN conducted OMO auction worth ₦50.0bn but issued a total of ₦45.4bn across three tenors. The 103-day (Offer: ₦10.0bn; Subscription: ₦5.6bn; Sale: ₦5.6bn) and 173-day (Offer: ₦10.0bn; Subscription: ₦9.8bn; Sale: ₦9.8bn) bills were undersubscribed at 0.6x and 0.9x with stop rates of 4.92% and 7.74% respectively. On the flip side, demand was strong for the 341-day (Offer: ₦30.0bn; Subscription: ₦79.1n; Sale: ₦30.0bn) instruments with a bid-to-cover ratio of 2.6x and a marginal rate of 8.94%. In the secondary treasury bills market, performance was bullish as average yield across benchmark tenors trended lower by 18bps w/w to close at 1.8%. The 180-day note enjoyed the most demand, resulting in average yield decline to 1.2% (vs 2.0% in the previous week). However, the 91 and 364-day bills closed the week flat. In the coming week, we expect high liquidity from maturing OMO bills and T-bills to drive rates lower in the secondary market.
Bonds Market: The Bears Maintain Grip on the Domestic Market
Performance in the secondary market turned bearish yet again this week as average yield rose 8bps w/w to 7.7%. Although the market gained on 4 of 5 trading days, a 28bps rise in yields on Tuesday outstrip the gains recorded on the other days. Across tenors, the short-term bonds recorded the most sell-offs with yields rising 121bps w/w. The mid-term instruments also recorded a 2bps rise in yields while yields declined 77bps at the long end. Across the SSA Eurobond instruments under our coverage, performance was bullish as all instruments gained w/w and average yield declined 26bps to 8.2%. The SENEGAL 2021 and GHANA 2029 instruments enjoyed the highest demand, with the yields declining 55bps and 50bps w/w respectively. Similarly, the NIGERIA 2030 and 2027 instruments recorded gains as yields fell 48bps and 46bps respectively.
For the African Corporate Eurobonds that we track, performance was mixed although positively skewed as average yield declined 13bps w/w to 4.9%. SIBANYE GOLD 2023 instruments led the pack with the yield declining 2.6ppts w/w. ECOBANK 2024 also recorded gains and the yield declined 91bps w/w. Conversely, ESKOM HOLDINGS 2021 recorded the highest sell-offs with the yield rising 1.9ppts w/w. In the domestic market, we expect a sustained bearish performance as investors position for the auction in the coming week. We expect the bullish run in the Eurobonds market to persist due to sustained demand.
