Financial Market: Apr-2021 Review and May-2021 Outlook
The Nigerian equity market closed the month in the green as the benchmark index, NSE All-Share Index, returned 2.0% on a month-on-month basis, closing the month at 39,840.2 points.
Consequently, YTD loss moderated to 1.1% while market capitalization printed at N20.9tn at the end of Apr-2021.
Conversely, the money market continued to witness strong bearish sentiments following a sustained uptick in yields at recent PMAs. In the secondary NT-bills market, the average NT-bills yield closed the month at 4.7%, up 61bps m/m from the average yield of 4.1% at the end of March.
Similarly, the bonds market remained bearish as the average sovereign bond yield surged by 211bps m/m to 11.9% in April from 9.8% at the end of March.
The equity market’s positive performance can be largely attributed to positive Q1-2021 earnings releases, particularly in the last week of the month. Blue-chip tickers, such as DANGCEM, BUACEMENT and SEPLAT reported compelling performances, driving bullish sentiments.
In line with our expectations, fixed income rates continued the uptrend with the 364-day NTB paper at the primary auctions closing at 9.75% (prev. 8.0%) at the last auction in Apr2021 and marginal rates on 2027, 2035, and 2045 instruments tracking significantly higher at 12.25%, 13.34% and 13.85% from 10.25%, 11.25% and 11.80% respectively.
This month, we expect the equity market trajectory to remain sideways with bearish sentiments dominating as investors book profits from gains recorded in Apr-2021.
For the fixed income and treasury markets, we expect rates will continue to rise at the primary and secondary markets fueled by dealers’ appetite for higher yields and the government’s need for finances. Thus, we retain our guide of underweighting equities and staying short in the Fixed income market.