This past week saw the equities market extend gains as sentiment picked up amidst rising oil prices and bargain trading in value stocks. As such, at 26,707.1 points, the ASI closed the week 3.4% higher from the previous week, trimming YTD losses to -6.8%.
The money market was relatively tight, with key rates trending higher. Specifically, the Open Buy Back (OBB) and Overnight (ON) rates closed the week at 3.9% and 4.4% respectively vs. 3.2% and 3.9% in the previous week, on the back of N100bn OMO auction which followed a Primary Market Auction (PMA) where spot rate for the 91d bills came in at 14.0%, 10bps higher than the last PMAs, while the 182d and 363d rates maintained status quo at 17.5% and 18.7% in that order.
Lately, the market has ridden on the positive momentum triggered by the recent rally in crude oil prices, with the energy and financial counters leading the pack as investors continue to hunt for bargains.
For the week, we expect sentiment to be mixed with intermittent profit-booking as investors lock-in gains while closing their books for the year. We see scope for yields to inch up on average this week. An impending bill maturity, and an already healthy level of system liquidity as suggested by low interbank rates raise expectation for increased OMO auctions by the CBN.
Equities: market bullish as the ASI extends w/w gains
This past week saw the equities market extend gains as sentiment picked up amidst rising oil prices and bargain trading in value stocks. As such, at 26,707.1 points, the ASI closed the week 3.4% higher from the previous week, trimming YTD losses to -6.8%.
A closer look at the sectoral performance revealed largely mixed patterns, albeit with a bullish undertone. The Oil and Gas sector closed the week higher to top the gainers’ chart with a positive weekly return of +7.4%. The Banking sector and the Industrial Goods sector followed suit with gains of +6.3% and +3.5% respectively.
Example of stocks that drove positive momentum in these sectors include ETI (+21.1%), SEPLAT (+20.6%), FO (+9.4%) and GUARANTY (+9.3%). On the flip side, the Consumer Goods and the Insurance Indexes closed the week lower with returns of –1.7% w/w and –0.5% in that order, underscored by sell-offs in UNILEVER (-12.1%), AXAMANSARD (-4.1%) and CADBURY (-4.0%).
When compared to the previous week, overall market sentiment however inched higher with market breadth settling at 2.1x (relative to 0.7x in the previous week) as 40 stocks appreciated against 19 decliners. Activity level during the week also improved as the average value traded surged by 168% w/w to N3.0bn, just as average volume traded saw a spike of 706% w/w to 491.4m units.
Lately, the market has ridden on the positive momentum triggered by the recent rally in crude oil prices, with the energy and financial counters leading the pack as investors continue to hunt for bargains. For the week, we expect sentiment to be mixed with intermittent profit-booking as investors lock-in gains while closing their books for the year.
Money Market rates moderate marginally w/w
In the past week, the money market was relatively tight, with key rates trending higher. Specifically, the Open Buy Back (OBB) and Overnight (ON) rates closed the week at 3.9% and 4.4% respectively vs. 3.2% and 3.9% in the previous week, on the back of N100b OMO auction which followed PMA where spot rate for 91d bills came in at 14.0%, 10bps higher than the last PMA’s, while rates on the 182d and 363d instruments maintained status quo at 17.5% and 18.7% in that order. We expect increased OMO auction this week as the money market rates suggest a relatively robust system liquidity. This should see rates inch up w/w.
FI Market: OMO calls and PMA awake the bears
In the past week, yield trended higher in the fixed income market, as OMO calls and PMA drove a bearish close to fixed income assets w/w. Specifically, a N100b OMO call by the apex bank, which followed PMA, ensured the T-bills market close the week largely bearish with average yield inching higher by 34bps, to stand at 17.8%.
In the same vein, the bonds market was bearish as investors appeared to be booking profit on their positions in the long dated instruments to take advantage of higher yields especially in the 91day bills.
At the end of the week, average yield moved 202bps north, to end the week at 18.0%. For this week, we see scope for bond yields to moderate on average with sentiment likely to be mixed. The overall FI market dynamics is expected to be shaped by the volume of OMO auction by the CBN.
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 previous close. However, the parallel market saw the domestic currency depreciate further by 62bps w/w on renewed demand pressure, to close at 482/USD.
At the international market, Oil price fell to US$54.3pb, (from $54.5pb a week earlier) despite Non-OPEC producers’ pledge to cut production by 558,000 bpd, providing further jolt. 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.
