Weekly Market Wrap: Market Closes Festive Week Positive Despite Friday Loss

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Despite a 207bps d/d moderation and two negative closes in the shortened week, the pre-Christmas rally held as the ASI closed out the week 86bps in the green. The biggest loser on Friday was the Oil & Gas sector (-463bps d/d, +208bps w/w), driven by sell-offs in SEPLAT (-748bps d/d, +137bps w/w), FO (-728bps d/d, +11.95% w/w), ETERNA (-600bps d/d, +217bps w/w) and OANDO (-101bps d/d, +316bps w/w).

However, the sector was still the largest gainer of the week thanks to a rally earlier in the week. Likewise, the Consumer Goods (-358bps d/d, +175bps w/w) and Banking (-62bps d/d, +98bps w/w) sectors ended the week higher despite Friday’s losses, as NESTLE (-848bps d/d, +67bps w/w), NB (-61bps d/d, +250bps w/w), ZENITHBANK (-129bps d/d, +132bps w/w) and GUARANTY (-29bps d/d, +148bps w/w) all lost on the day but gained for the week. Finally, the Industrial Goods sector (-147bps d/d, -99bps w/w) was the only loser w/w as DANGCEM (-219bps w/w) and WAPCO (-79bps w/w) dragged the sector lower.

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With investors likely to continue to take positions on the final trading day of the year, we expect a positive session to close out the year and anticipate heightened activity levels.

Stock Watch:

PZ released its H1’18/19 results today, reporting a 15% y/y decline in revenue to ₦35 billion, and a 107% y/y increase in PAT to ₦1.2 billion. The stock gained 409bps in Friday’s session to settle at ₦11.45 and is down 44% in 2018.

Sentiment remains bullish despite tight system liquidity

Despite consistent OMO mop-ups, the interbank call rate declined 450bps w/w to settle at 17.17% on Friday. Overall, the CBN sold ₦420 billion in OMO auctions this week, also selling ₦646 billion at a special OMO on Thursday.

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In the secondary market, buying was observed in the T-Bills space, with yields declining 1bp d/d and 13bps w/w despite tightened liquidity. Specifically, yields on the 286DTM and 335DTM bills declined 82bps w/w and 35bps w/w to settle at 16.36% and 16.59% respectively. Likewise, buying was also observed in the bond space, with benchmark yields declining 9bps d/d and 21bps w/w, with demand tilted towards the long-dated bonds. Notably, yields on the 13.98% FGN FEB 2028, 10.00% FGN JUL 2030 and 12.40% FGN MAR 2036 bonds declined 35bps, 35bps and 37bps w/w to settle at 15.29%, 15.27% and 15.24% respectively.

We expect further interventions from the CBN next week to maintain tightened liquidity. However, we anticipate some buying in the market on the last day of the year.

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On Thursday, the CBN injected $210 million into the various foreign exchange windows. Amid this, the Naira appreciated ₦0.19 w/w at the I&E FX Window to settle at ₦364.35 against the dollar and appreciated ₦1.50 against the dollar to settle at ₦362.00 w/w in the parallel market.

We expect the naira to remain relatively stable across the various windows of the currency space as the CBN maintains interventions in the FX market.

Corporate Earnings

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