The Nigerian Equities Market: Weekly Report

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Local Bourse Starts the Week in Green, NGX ASI Gains 14bps
Local Bourse Starts the Week in Green, NGX ASI Gains 14bps

Local Economic Updates
President Muhammadu Buhari is scheduled to formally unveil the Nigerian Central Bank Digital Currency (CBDC), known as the eNaira, on Monday 25 October 2021, at the Senate House, Abuja.

The CBN will further engage various stakeholders as they enter a new age consistent with global financial development. The theme of the eNaira is “Same Naira, more possibilities”.

Also, FBN Holdings notified the public of the acquisition of substantial shareholdings (5.07% – circa 1.82 billion shares from the company’s issued share capital of 35.90 billion shares) by Mr. Otedola Olufemi Peter and his nominee – Calvados Global Services Limited.  As a result, Mr. Otedola has joined the trio of Chief Mike Adenuga (the current Chairman of Globacom), Mr. Tunde Hassan-Odukale (the current Chairman of FBNH) and Oba Otudeko in the race for the control of the holding company. According to market analysis, Otedola, Adenuga, the Hassan-Odukales and Otudeko shareholding are above 5% and this has placed them in a position to control the organisation.

Nigeria’s external reserves crossed the US$40 billion level early in the week, signaling the likelihood that the IMF’s SDR allocation has been fully drawn, and the US$4 billion Eurobond issuance has been factored into the nation’s bourse. Last Thurs
day, the external reserve level stood at US$40.96 billion, which is the highest level seen since 17th October 2019.

Global and Emerging Market Economic Updates
In the past week, the Federal Reserve Chair Jerome Powell, said high inflation is likely to last well into 2022 and reiterated that the Fed is on track to commence the tapering of asset purchases. This represents a contrast to the Fed Chairman’s previous posture on inflation being “transitory”.
Also, with the winding out of most enhanced pandemic-related benefits, the initial claims for unemployment insurance fell to the lowest since March 2020. In the week ended, first-time filings for jobless claims printed impressively, totaling 290,000 relative to 296,000 recorded in the preceding week, and falling below a 300,000 Dow Jones estimate. Likewise, continuing claims reached yet another all-time low, declining to 2.48 million.

Elsewhere, China’s real estate giant, Evergrande Group, averted a possible debt default due on the 23rd October 2021. The company was reported to have made a US$83.5 million payment on a U.S. dollar bond on Thursday. Nonetheless, this basically kicks the can down the road, as the real estate giant remains overwhelmed by over US$300 billion in debts, with the next interest payment falling due on the 29th of October. The long-term strategic direction for the company is to leverage the growing green movement by prioritising its electric vehicles business over its struggling real estate business.

in the oil market, the rally continued for the ninth consecutive week (its longest streak since 2015) as the price of Brent Crude hit $85.53/barrel as consumption continues to outstrip supply.

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The Nigerian Equities Market

The NGX ASI closed the week in green by 0.78% as it closed positive in 3 of the 4 trading sessions during the week as a result of buy pressures in bellwether stocks such as NGXGROUP (+23.94%) and UNILEVER (+9.85%). Consequently, at 41,763.26 points, the equities market’s Year-to-Date return improved to 3.71% as market capitalisation increased by 0.79% to close at N21.79 trillion.

Market breadth (a measure of investor sentiment) weakened last week, declining from 3.00x to 0.94x as 34 stocks appreciated against 36 stocks that declined. NGXGROUP and CUTIX topped the market gainers with 23.94% and 21.00% WoW respectively, while ROYALEX and UNIVINSURE were the top laggers with declines of 17.19% and 9.09% respectively WoW.

The activity level weakened as the trade volume and value decreased by 44.89% and 41.91% respectively WoW. A total turnover of 1.565 million shares worth N18.384 billion in 21,621 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities by volume were FBNH, ETRANZACT and ACCESS. They accounted for 626.888 million shares worth N6.303 billion in 3,677 deals; contributing 40.07% and 34.29% to the total equity turnover volume and value respectively.

The Nigerian Equities Market: Weekly Report
The Nigerian Equities Market: Weekly Report

Outlook for the week
We expect bullish momentum to persist in the coming week as the equities market still presents decent opportunities for investors chasing positive real return on investments.
The Nigerian Fixed Income
There was relatively bearish sentiment in the bond market last week as four (4) of the five (5) tenor yields under coverage closed higher while the yield on the 30-Year tenor bond compressed by 34bps. The yields on the 1-Year, 3-Year, 5-Year and 10-Year tenor bonds increased by 45bps, 2bps, 15bps and 10bps respectively WoW.

The activity in the Nigerian Treasury Bills Market was mixed as the 91-day paper closed flat at 3.76%, the 182-day paper yield increased by 19bps while the 364-day paper yield compressed by 49bps.
In the Money Market space, the Open Buy Back (OBB) and Overnight (O/N) rates decreased to 19.00% and 19.25% from 19.50% and 20.00% respectively WoW.

Outlook for the week
We expect market activity in the fixed income market to be influenced by liquidity levels and foreign investor participation.