Capital Market Playbook: Aug-19 review and Sept-19 outlook

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Secondary equity market performance stayed bearish in Aug-1 9, as the NSE ASI declined marginally by 0.7% m/m while YTD return deteriorated to -1 2.4%. However, the allocation of portfolios to the newly sworn-in ministers by President Buhari gave investors something to cheer. In the Bond market space, we saw a lukewarm outing at the Aug-1 9 FGN bond auction amid poor demand from market participants and DMO’s refusal to sharply raise interest rates.

Capital Market Playbook: Aug-19 review and Sept-19 outlook - Brand Spur

Meanwhile, bearish sentiments dominated the spectrum of the secondary fixed income market amid a risk-off sentiment by foreign investors. As such, average bond and treasury bills yield spiked by 261bps m/m and 8 7bps m/m to 1 3.8% and 1 4.1% respectively.

Over Sept-19, we expect the events in global and domestic macroeconomic space to
keep investors interest for equities tepid. In addition, we expect yields to stay elevated amid jitters in the global space linked to trade tension and BREXIT. Also, the need for the fiscal authorities to raise funding for the 2019 budget may reduce the FG’s bargaining power to drive down rates in the debt market. Meanwhile, we expect the CBN to sustain its spate of OMO issuances in Sept-19 as OMO maturity totalling c. N1.3t n are scheduled to mature over the month.

Overall, we imagine a slight uptick in money market rates as the Apex bank looks to stimulate FPI inflows and reduce pressure on FX reserves. Still, the equities market is unlikely to rebound in the absence of far-reaching policy pronouncement.

United Capital Plc Research