At the close of the week, the domestic equities market performed negatively as investors took profits in UAC-PROP (-13.0%), CAP (-9.8%) and ARBICO (-9.7%). Consequently, the NSE All-Share Index closed in the red on 3 of the 5 trading sessions in the week, falling 72bps w/w to settle at 23,871.33 points. Similarly, YTD loss settled at 11.1% while market capitalisation shed ₦90.7bn w/w to ₦12.4tn. Activity level weakened as average volume and value traded fell 44.4% and 46.4% to 221.4m units and ₦2.4bn respectively. The top traded stocks by volume were FBNH (141.6m units), GUARANTY (69.1m units) and ZENITH (56.1m units) while GUARANTY (₦1.5bn), DANGCEM (₦895.7m) and ZENITH (₦848.0m) 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 2.2% on the back of sustained sell pressures in CAP (-9.8%) and DANGCEM (-4.3%). Trailing, the Insurance and AFR-ICT indices shed 0.6% and 0.3% respectively on account of losses in CUSTODIAN (-9.5%), NEM (-7.4%) and MTNN (-2.2%). Price declines in UBN (-8.6%) and ACCESS (-2.3%) dragged the Banking index lower by 3bps. Conversely, the Consumer Goods index led gainers, up 2.3% as investors took positions in UNILEVER (+21.0%) and NASCON (+5.0%) while buying interest in ETERNA (+18.5%), MOBIL (+9.9%) and TOTAL (+6.7%) buoyed performance in the Oil & Gas index by 1.6%.
Investor sentiment as measured by market breadth (advance/decline ratio) weakened to 1.0x from 1.8x last week as 29 stocks advanced against 28 that declined. The top performing stocks for the week were NPFMCRFB (+50.8%), UNILEVER (+21.0%) and MAYBAKER (+20.9%) while UAC-PROP (-13.0%), CAP (-9.8%) and ARBICO (-9.7%) were the laggards. In the coming week, we anticipate a mixed performance as investors react to more corporate earnings releases. Additionally, we expect to see some bargain hunting activities in early trades next week.
Foreign Exchange Market: Gradual Easing of Lockdown and Production cut lifts oil
Oil prices sustained a positive momentum this week, up 3.8% w/w to US$32.2bbl. The uptick in prices was due to demand recovery as economies reopened, US production forecasts for 2020-2021 were cut and Saudi Arabia’s proposed additional 1mb/d output cut in June. Domestically, the external reserves rose 2.5% w/w to US$35.0bn (5/14/2020) reflecting the impact of Nigeria’s borrowing from the IMF.
In the FX market, the CBN spot rate traded flat all week at ₦361.00/US$1.00 while the rate at the parallel market depreciated ₦10.00 to ₦455.00/US$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate appreciated 94kobo to close at ₦386.00/US$1.00. However, activity level in the I&E Window moderated this week as total turnover declined 3.0% to US$163.3m from US$168.3m recorded in the previous week.
At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts settled at US$15.4bn, 1.0% (US$149.5m) higher than the prior week. The Apr 2021 instrument (contract price: ₦393.92) had the most buying interest in the week with additional subscription of US$53.1m which took total value to US$435.3m. Meanwhile the Feb 2021 instrument (contract price: ₦392.97) received sell-offs worth US$1.3m putting the total value to US$1.5bn. In the coming week, we expect exchange rate to be pressured due to more FX demand.
Money Market: Bullish performance in the secondary T-bills Market
This week, the OBB and OVN rates opened the week at 8.5% and 9.6% respectively, higher than 7.4% and 8.3% recorded at the close of the previous week as system liquidity fell from ₦505.5bn to ₦221.5bn. On Wednesday, the OBB and OVN rates climbed to 7.0% and 7.6% respectively from 7.4% and 8.2% (on Tuesday) but fell on Thursday to 3.6% and 4.4% as system liquidity rose to ₦622.6bn. Finally, on Friday, OBB and OVN rates declined to close the week at 2.8% and 3.4% respectively despite lower system liquidity at ₦423.2bn.
On Wednesday, the CBN at the primary market auction (PMA) issued 91-day (Offer: ₦4.4bn; Subscription: ₦22.3bn; Sale: ₦19.8bn), 182-day (Offer: ₦12.9bn; Subscription: ₦41.2bn; Sale: ₦40.1bn) and 364-day (Offer: ₦16.3bn; Subscription: ₦102.0bn; Sale: ₦82.9bn) instruments at a marginal rate of 2.5%, 2.85% and 3.84% respectively. Demand was strong accross tenors as the 364-day, 91-day and 182-day instruments were oversubscribed at 6.2x and 5.1x and 3.2x respectively. Furthermore, on Thursday, the CBN conducted OMO auction worth ₦70.0bn. However, there was no sale as investors maintained a risk-off approach towards the auction.
In the treasury bills secondary market, performance was bullish as average yield across benchmark tenors trended lower, down 40bps w/w to close at 2.4%. The 91 and 182-day instruments enjoyed the most buying interest as yields declined 60bps apiece to 1.9% and 2.2% respectively while the 364-day instrument dipped 10bps to 3.1%. In the coming week, we expect inflows from OMO maturities worth ₦10.0bn and we envisage that system liquidity will remain elevated, driving rate lower in the secondary T-Bills market.
