|
Getting your Trinity Audio player ready...
|
This past week saw the equities market post gains, as sentiment swung upbeat across key sectors. As such, at 25,740.8 points, the ASI closed the week 1.6% higher from the previous week, trimming YTD losses to -10.1%.
The money market opened relatively liquid as FAAC allocation inflow provided a boost to system liquidity, placing downward pressure on key market rates. Specifically, the Open Buy Back (OBB) and Overnight (ON) rates closed the week at 10.0% and 10.5% respectively vs. 11.9% and 12.6% in the previous week, despite aggressive OMO auction worth N200b, towards the end of the week.
In the light of recent news-flow around OPEC production cut, which has driven a rally in oil prices, momentum is likely to remain positive in equities for the most part of the week, with intermittent profit booking especially on financials and energy counters.
We however expect the euphoria around the OPEC deal to subside in the coming weeks as the market digests the probability of full compliance by the cartel members, as well as a possible trigger for increased shale production if oil prices continue to rally.
For the FI market, we see scope for yields to moderate on average though sentiment is likely to be mixed through the week. Overall, we expect possible CBN OMO calls to shape the dynamics of the FI market this week.
Domestic Financial Markets Review and Outlook
Equities: swing positive as the ASI gains w/w
This past week saw the equities market post gains, as sentiment swung upbeat across key sectors. As such, at 25,740.8 points, the ASI closed the week 1.6% higher from the previous week, trimming YTD losses to -10.1%.
A closer look at the sectoral performance revealed largely mixed sentiment, albeit with a bullish bias. Specifically, the Oil and Gas sector closed the week higher to top gainers’ chart with an appreciation of +10.0%. The Banking Index and the Consumer Goods sector followed suit with positive weekly returns of +4.2% and 0.7% respectively, just as the Industrial Goods sector closed the week marginally up by +0.1%. Example of stocks that drove positive momentum in these sectors include MOBIL (+55.1%), PORTLAND (+31.2%), WEMA (+9.6%), CADBURY (+9.6%), OANDO (+9.3%), GUARANTY (+9.2%) and OKOMU (+5.0%). Conversely, the Insurance Index was the only laggard which closed the week lower with a return of -2.0% w/w weighed by bearish trading in AXAMANSARD (-9.0%).
When compared to the previous week, overall market sentiment however worsened with market breadth settling at 0.8x (relative to 1.0x in the previous week) as 27 stocks appreciated against 32 decliners. Activity level during the week was more divergent as the average value traded declined by 37% w/w to N1.7bn, average volume traded saw a spike of 300% w/w to 360.6m units.
In the light of recent news-flow around OPEC production cut, which has driven a rally in oil prices, momentum is likely to remain positive in equities for the most part of the week, with intermittent profit booking especially on financials and energy counters. We however expect the euphoria around the OPEC deal to subside in the coming weeks as the market digests the probability of full compliance by the cartel members, as well as a possible trigger for increased shale production if oil prices continue to rally.
Money Market rates moderate marginally w/w
In the past week, the money market opened relatively liquid as FAAC allocation inflow provided a boost for the system liquidity, with key market rates trending lower. Specifically, the Open Buy Back (OBB) and Overnight (ON) rates closed the week at 10.0% and 10.5% respectively vs. 11.9% and 12.6% in the previous week, despite aggressive OMO auction worth N200b, towards the end of the week. We expect another OMO auction early this week as the money market rates suggest a relatively robust system liquidity.
FI Market: yields mixed on FAAC inflow
In the past week, yield trend in the fixed income market was mostly mixed, as investors rode on the FAAC inflow to hunt for bargain in short-dated papers. Furthermore, uncertainties around the domestic macro fundamentals tilted momentum more towards the T-bills.
Despite a N200b OMO call by the apex bank, the T-bills market was mostly bullish with yields on average down by 72bps, closing the week at 18.0%. However, the bonds market was bullish as investors appeared to be booking profit on their positions in the long dated instruments to take advantage of higher yields in T-bills. At the end of the week, average yield moved 10bps north, to end the week at c.15.9%. This week, we see scope for yields to moderate on average with sentiment likely to be mixed. We think overall FI market dynamics will be shaped by possible OMO call by the apex bank.
Naira flat at the official window, depreciates at the parallel market
At the spot market, the naira closed at N305 NGN/USD in the past week, trading flat on the previous close. However, the parallel market saw the domestic currency depreciate further on a renewed pressure 3pptw/w to close at 479.0/USD. At the international market, Oil price rose to US$54.5pb, (from $47.2 bps a week earlier) on the back of recent agreement by OPEC members to cut production by 1.2mbpd. In the week ahead, we expect pressure on the naira to linger especially at the parallel market as unmet demand from the official market continues to stoke imbalances.
