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In the prior week, the equity market which started on a bearish footing closed the week bullish. This was as investors reacted positively to the President’s portfolio allocation to the newly swornin ministers. As a result, equities jumped 3.2percent week-on-week (w/w), as NSEASI rebounded above the 27,000points support level, to close the week at 27,800.2 points.
Also, year- to – date ( YTD) return improved to – 11.6percent, with market capitalization adding N403.2billion in value, to close at N13.5trillion. Activity levels improved, as average value and volume traded rose 12percent and 90percent w/w respectively.
Performance across the major sectors was bullish, save for the Insurance sector, which closed the week in the green territory. The Banking index (+9.2percent) led the gainers camp, owing to price appreciation in ETI (+ 33.3percent ) , Fidelity Bank (+20percent), Zenith Bank (+12percent), Access Bank (+9.9percent), FBNH (+8.7percent), UBA (+ 8.1percent), Gtbank (+7.3percent), and Stanbic (+6.1percent). This was amid the impressive H1-19 financial result posted by Gtbank and Zenith Bank with both companies declaring an interim dividend of N0.3/share.
The Consumer Goods (+ 4percent), Oil and Gas (+1.6percent) and Industrial Goods (+1.1percent) indexes followed suit, buoyed by UACN (+ 18.9percent), OANDO (+20.9percent) and BERGER (+9.5).
On the flip side, the Insurance sector (-1.4percent) index stayed bearish on in CONTINSURE (-10.3percent). In the Telcos space, interest in MTNN (+ 2.2percent) supported the sector while Airtel Africa remain unchanged ( 0.0percent) Investors sentiment was above the waters, as market breadth improved to 3.0x (previously 0.5x); with 39 stocks advancing, while 13 stocks declined. This week, more publication of H1-19 earnings by tier 1 banks should drive performance. More specifically, the formation of the cabinet is positive for direction but excitement may fizzle out as time goes on.
Money Market: Banks daily borrowings at SLF window at 29 months high
The overall money market liquidity level was largely tight in the prior week, amid a sparse inflow of funds as foreign investors continued to stay on the sidelines.
At the start of the week, the advent of wholesale FX funding sales by the CBN added further pressure on the already tight liquidity level, a move which saw average interbank rates touch its highest since midApril 2019. Additionally, the high rates at the interbank market forced the banks to turn actively to CBN’S Standing Lending Facility (SLF) window for overnight funding. Notably, total daily borrowings by banks at the SLF window spiked to its highest since Apr-17 and stayed above N400billion, totaling N1.8trillion as on Thursday.
Also, following OMO maturity of about N92.3bn on Thursday, the CBN floated an OMO auction of N110.0bn which eventually resulted in a “No Sale” as investors craved for higher yields amid tight liquidity. In all, average interbank rates ( OBB and O/ N) inched higher from 18.3percent to close the week at 18.8percent, comparing unfavourably to SLF rate of 15.5percent.
Expectedly, these sentiments reflected on treasury bills yields at the secondary market as average T-bills yields spiked by 129bps w/w to settle at 15.1percent.
This was amid reports that market players were rediscounting bills and are perhaps re-positioning for a higher yield environment. This week, we expect to see a bullish sentiment as inflows from OMO (N393.3billion) and Treasury Bills (N208.6billion) maturities, as well as retail FX refunds and a probable FAAC payments to States & local government, are expected to buoy the overall liquidity conditions in the system.
Though the inflows from NTB and retail FX refunds are expected to be mopped up by the CBN, inflows from OMO maturity and probable FAAC payment might also be mopped by the CBN via OMO sales, capping the strength of the bullish sentiments in the secondary market.
Bond Market: Poor outing at the Aug-19 bond auction
The tight liquidity within the system amid the continued absence of foreign investors also filtered into the long-dated bond market. The DMO’S Aug-19 Bond auction saw a lukewarm outing as demand was underwhelming across tenors. The total subscription (N95.1billion) that turned up at the auction was only 65.6percent of the total N145.0bn the FG sought to raise. A deep dive across tenors showed that the re-opened 5-year bond saw the least demand with a bid-tocover ratio of 0.3x while interest in 10-year and 30-year bonds was marginally higher with bidto-cover ratios of 0.8x and 0.9x respectively.
Notably, on average, bid rates demanded by buyers ranged between 13.2percent and 15.7percent across tenors, while the DMO marginal rates averaged 14.4percent across tenors (5-year: 14.3percent, 10year: 14.4percent and 30-year: 14.6percent).
This perhaps explains the reason behind the paltry allotment outcomes ( N15billion) which is just 10percent of the initially offered amount.
Out of the record N1.201trillion worth of Nigerian equities exchanged on the Nigerian Bourse in seven months period ended July 31 2019, domestic investors were responsible for N670.45billion or 53.44percent of the total.
Out of the total equities trade by domestic investors in the review period, the retail investors accounted for N355.15billion while domestic institutional investors traded stocks value at N315.29billion in the seven months period.
The foreign portfolio investors ( FPIS) traded just N530.57billion or 46.56percent of the total value of traded equities in the review period. Foreign inflow stood at N243.35billion while outflow was N287.22billion.
The highlights of performance of the market over the last decade show that over a 12 year period, domestic transactions decreased by 66.68percent from N3.556trillion in 2007 to N1.185trillion in 2018 whilst foreign transactions increased by 97.88percent, from N616million to N1.219trillion over the same period.
In 2018, total foreign transactions accounted for about 51percent of the total transactions carried out in that year while domestic transactions accounted for about 49percent of the total transactions in the same period. Recall that in seven months to July 31, 2019, investors traded about N1.201trillion worth of Nigerian equities. This represents a huge decline of about 31percent year-on-year (YOY) when compared with N1.743trillion recorded in the corresponding seven months period of 2018.
In January 2019, equity traders exchanged stocks valued at N122.08billion, February (N188.08billion), March ( N110.11billion), April ( N148.91billion), May (N221.13billion), June ( N297.25billion), and July (N113.47billion).
Looking at the monthon- month ( MOM) report, it shows that total transactions at the nation’s bourse in July 2019 decreased significantly by 61.82percent, from N297.25billion in June 2019 to N113.47billion in July 2019.
The performance in the month of July when compared to the performance in July 2018 revealed that total transactions also decreased by 22.31percent.
