Last week, the equities market received a new lease of life as the NSE-ASI advanced by 2.0% w/w the biggest gain in 8-weeks. The bullish performance was largely spurred by activities from local players who had been barred from participating at the OMO market and looking for new investment outlets to re-invest maturing OMO bills. Additionally, negative real yields on FGN Treasury bills, unattractive yields on bonds, as well as the scarcity of bills/notes, further forced investors to look for re-investment options inequities with more attractive dividend yields.
Expectedly, the stock market has since returned to its somber state, as short-term traders continue to take profit. We ask, “is this catalyst one-off?” A look into CBN’s data showed that another N1.5tn is scheduled to mature between now and Dec-19 ending. However, barred participants at the OMO market who hold c. 25% (N380.0bn) of these maturing funds will be looking for new investment outlets, such as equities and bond.
In our view, with just two bond auctions left in 2019 (estimated at N300bn – between Nov-19 and Dec-19) and given the dominant nature of FPIs and Banks at the monthly bond auction, investment opportunities for other local players could be capped at c. 30% (N90.0bn).
In all, over N250.0bn is set to hit the system between now and December, with a bulk of those funds looking for new placements aside from the primary OMO, NTB and Bonds investments. Thus, this should contribute positively to the recent recovery story of the equity market.
United Capital Research
