WEEKLY MARKET WRAP: Buying Wanes On NSE As Sell Pressure Surfaces

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  • The Nigerian equity market rounded off the week on a largely mixed note, gaining 8bps on the day. Despite gains in the last three sessions of the week, the Nigerian bourse lost 113bps w/w, cutting ytd returns to 11.5%. Drilling down to sector performances, the Consumer Goods sector (d/d:+116bps; w/w: -89bps) closed in the green today – supported by strong buying interest in NESTLE (+409bps), CADBURY (+203bps) and INTBREW (+43bps). The Oil & Gas sector closed the trading day flat, bringing its w/w loss to 105bps. On the other hand, the Banking (-51bps) and Industrial Goods (-17bps) sectors declined on the day following losses in FCMB (-500bps), WEMABANK (-480bps), DIAMONDBNK (-448bps) and CAP (-460bps). The sectors closed 57bps and 107bps lower respectively w/w.
  • Despite today’s mildly positive close, choppy intraday trading and negative market breadth point to mixed sentiment on the Nigerian bourse. Nevertheless, we do not rule out investors swooping in to take advantage of beaten down prices as earnings season approaches.
  • Stock Watch: NB recently released its FY’17 results with the top line and bottom line printing at ₦345 billion and ₦33 billion respectively, 10% and 16% above FY’16 figures. The stock currently trades at ₦131.00 below Vetiva’s target price of ₦149.36 and has returned -3% YTD.

Eurobond announcement ignites buy interest in bond space

  • Amidst constrained liquidity, the T-bills market traded mostly mixed at week open. At mid-week, the CBN conducted a PMA, offering and selling ₦176 billion on the 91DTM, 182DTM and 364DTM bills at effective yields of 12.32%, 14.65% and 15.87%. With stop rates closing below secondary market levels, buying interest was briefly strengthened before swiftly cooling off towards week close. Overall, yields in the T-bills market advanced 3bps on average w/w. The bond market was similarly mixed at week open, but with light buying activity on select securities. Towards week close, the DMO announced the completion of the second tranche of
    the $5.5 billion Eurobond issue. Following this announcement, buying interest resurfaced in the bond market at week close, with yields on benchmark bonds declining 19bps on average w/w.
  • We believe the positive euphoria from the Eurobond pricing, which is generally seen as decent given current global rate environment, would support yield moderation in the week ahead. Meanwhile, system liquidity appears tight, partly underscored by the increase in Call rate to 18% (Previous: 7%) even as the CBN refrained from OMO auction today. We expect this to cap potential demand particularly early in the week.
  • The CBN continued its liquidity injections into the Foreign Exchange Market at week open, selling $210m in three segments of the market. Amidst this, the naira depreciated ₦0.09 w/w at the I&E FX Window to close at ₦360.36 but appreciated ₦0.50 in the parallel market to settle at ₦361.50 against the dollar.
  • We expect further CBN interventions in the coming week to sustain liquidity in the foreign exchange market.

VETIVA RESEARCH

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