Domestic Equities Market, Bullish momentum persist… ASI up 0.2% w/w
The domestic market closed the week on a positive note as the All-Share index gained 0.2% w/w to 54,327.30 points driven by gains in MTNN (+1.7%), DANGCEM (+1.2%), and WAPCO (+1.4%). Also, market capitalization rose by ₦62.2bn to ₦29.6tn while YTD return improved to 6.0%. Meanwhile, activity level dampened as average volume and value traded fell 75.1% and 17.4% sequentially to 188.9m units and ₦4.5bn. The most traded stocks by volume were GTCO (103.6m units), UNIVINSURE (92.4m units), and TRANSCORP (51.8m units) while GEREGU (₦4.5bn), GTCO (₦2.6bn), and AIRTELAF (₦2.5bn) led by value.
Performance across sectors under our coverage varied as 3 of the 6 indices advanced while the remaining 3 closed in the negative. The AFR-ICT index led the advancers, up 0.7% w/w, following price appreciation in MTNN (+1.7%). Trailing, the Industrial Goods and Oil & Gas indices rose 0.6% w/w apiece buoyed by gains in DANGCEM (+1.2%), WAPCO (+1.4%), CONOIL (+20.9%), and OANDO (+1.6%). Conversely, sell pressure on AIICO (-4.8%), MBENEFIT (-11.1%), and CORNERST (-6.3%) drove the Insurance index lower by 3.3% w/w. Also, the Banking and Consumer Goods indices fell 0.9% and 0.6% w/w respectively due to selloffs on FIDELITY (-7.0%), STERLING (-7.4%), NB (-3.1%) and CHAMPION (-8.2%).
Investor sentiment as measured by market breadth waned to -0.3x from 0.4x in the prior week, as 22 stocks gained, 44 lost while 86 closed flat. TRIPPLEG (+30.5%), INTENEGI (+25.3%), and CONOIL (+20.9%) led the top gainers while FTNCOCOA (-15.2%), PRESTIGE (-13.0%) and JAPAULGO (-11.8%) led the decliners. In the coming week, we expect a mildly bearish market performance on account of dampened investor sentiment.
Foreign Exchange Market, Naira Skids in Parallel Market
Last week, crude oil price recorded its biggest w/w gain thus far in 2023 (up 9.2% to $86.06/bbl.), driven by Moscow’s announcement that it would cut daily output by 500,000bpd effective from March 2023, in retaliation to EU’s recent oil price cap and import ban policy. On the home front, the foreign reserves compressed further by 51bps w/w to $36.8bn – the lowest level since end of Q3:2021. In the local currency market, pressure continued to mount on the Naira in the parallel market, evidenced by the 0.7% w/w gain of the base currency (USD) to ₦755.00/$1.00. Meanwhile, the pair traded flat at ₦461.50/$1.00 in the Investors’ & Exporters’ (I&E) Window. As such, the differential between the parallel market and official rate widened to ₦293.50 from ₦290.83 the prior week.
At the FMDQ Securities Exchange FX Futures Contract Market, the total value of open contracts increased 1.7% w/w to $4.7bn. This was supported by the 8.7%, 5.3%, and 4.1% w/w jump in the contract values of the AUG & SEP 2023 and JAN 2024 instruments (contract prices: ₦486.65, ₦484.47, and ₦495.38), following additional subscriptions of $31.7m, $25.8m, and $19.0m during the week. We expect the lingering FX shortage to drive a mild deterioration in the parallel market rate next week.
Money Market, Stop Rate Dips Further at T-bills PMA
This week, system liquidity tapered as sales of T-bills worth ₦417.1bn offset inflows of ₦225.6bn from maturing bills (of which OMO bills: ₦38.5bn). Consequently, the average daily system liquidity fell 54.9% w/w to ₦373.5bn while interbank rates diverged with the OPR rate down 13bps to 10.8% and OVN rate up 6bps to 11.1%. At the Primary Market Auction (PMA), the CBN placed ₦217.1bn on offer across the 91-day (₦4.5bn), 182-day (₦1.3bn) and 364-day (₦211.2bn) instruments. We observed a healthy demand, albeit weaker than the prior auction, as the bid-to-cover ratio fell to 2.5x against 4.7x previously. Across tenors, the 182-day bill recorded the strongest buying interest (bid-to-cover ratio: 11.4x) while the 91-day and 364-day T-bills were oversubscribed by 2.2x and 2.5x respectively. Overall, stop rates declined 19bps, 150bps and 254bps sequentially to 0.1% (91-day), 0.3% (182-day) and 2.2% (364-day) reflecting CBN’s strong rate management stance despite the January MPR hike and elevated inflation. Elsewhere, secondary T-bills yields printed at an average of 2.1%, unchanged from the prior week with no noticeable change across tenors. Nonetheless, the secondary market yield is anticipated to advance next week supported by weak liquidity condition in the absence of maturing T-bills and FGN Bond coupon.
Bonds Market Average Yield Declines in the Local Bond Market
The domestic bond market ended the week on a positive note following a bullish run on two of the five trading days. Consequently, average yield declined 27bps to 12.9% backed by strong interest in the short and mid tenors. The short-end bonds saw the most demand as average yield lowered 121bps w/w while yield on the mid-dated bonds declined 21bps w/w. Meanwhile, yield on long-term instruments rose 3bps w/w. In the SSA Eurobonds market, risk-off sentiments sustained negative performance to drive average yield higher by 44bps w/w to 21.7%. The most sell-off was recorded in the Zambian 2024 instrument (yield up 576bps w/w). Trailing, the Zambian 2027 and Ghanian 2025 instruments underperformed as yield climbed 97bps apiece.
A similar narrative played in the Corporate Eurobonds space under our coverage as average yield rose 27bps w/w to 9.1%. Yield increase on the Eskom Holdings 2025 and ACCESS 2026 instruments (up 101bps and 102bps) majorly drove the lacklustre performance. In the coming week, trades in the domestic market to be guided by the outcome of DMO’s auction and minute liquidity addition from OMO maturity (₦60.0m). For the Eurobond space, we do not see a major catalyst offsetting investors’ weak sentiment hence we expect the bearish run to persist. Afrinvest
