In the prior week, the equity market extended its recent bearish run as a late Santa visit on Friday failed to erase losses recorded on Monday and Tuesday, preceding the two-day Christmas holiday.
Accordingly, the NSE-ASI declined 0.4percent week-on-week (w/w) to settle at 26,416.48 points and year-to-date (YtD) loss worsen to -16percent (previously: -15.6percent). Also, market capitalisation fell by N51.3billion to close the week at N12.7trillion. Activity level was depressed as average value and volume traded declined 23.3percent and 11.2percent w/w respectively to N3billion and 245.2million units.
Performance across sectors was mixed as three out of five sectors under our watch closed in the green territory. The Consumer goods led the green campaign (+4.8percent), followed by Insurance (+1.4percent) and Oil & Gas (+0.7percent) indices, thanks to price appreciation in Nestle (+10percent), Unilever (+8.9percent) Cadbury (+6.8percent), NEM (+10percent), Linkage Assurance (+8.2percent), Oando (+6.8percent) and Japaul Oil (+5percent).
On the flip side, Banking (-0.3percent) and Industrial goods (-0.3percent) sectors closed the week negative owing to the sell-offs in GTBank (-2percent), FBNH (-3.9percent) and CCNN (-2.9percent).
Investors sentiment stayed above the water as market breadth closed at 1.9x (previously 1.4x), with 28 stocks advancing, while 15 stocks declined. This week, we expect end of the year portfolio rebalancing to drive prices northwards in last two trading days of 2019. This may however be erased on Thursday and Friday as the market opens for the year.
Read also: How investors see 2020 shaping up in US financial markets
Money Market: Penalty CRR debit keeps liquidity in check
During the holiday shortened week to 27th Dec-19, system liquidity remained largely buoyant even as naira outflows mildly matched inflows. Notably, the major liquidity inflow which came in via a sizable OMO maturities (N907.8billion) on Friday offsets the liquidity squeeze from CBN’s penalty CRR debit (N650.0bn) on Monday and N250.5bn OMO sales on Friday. Overall, the average interbank funding rate (OBB & O/N) closed the week higher by 1.7percent w/w to settle at 4.3percent.
At the OMO auction on Friday, demand was non-existent for the short and mid tenor bills as eligible investors piled into the high yielding long tenor bills. Accordingly, the apex bank sold N250.5billion of the 361-day bill, with stop rates maintained at 13.28percent.
Elsewhere, activities at the secondary money market was mixed. This was as some of the non-eligible OMO market investors reinvest excess fund from OMO maturities in FGN Treasury Bills with relatively unattractive yields. Accordingly, average NTB yields dropped by 22bps w/w to settle at 5.6percent. Meanwhile, secondary OMO market sentiment was lackluster as the penalty CRR debit on Monday spurred selling interest in short-dated OMO bills by some of the affected banks. Also, the CBN’s OMO sale on Friday further doused the secondary market demand. In all, average OMO yields tracked higher by 19bps w/w to close at 13.3percent.
With another sizable OMO maturities (circa N518.1billion) expected this week, we expect the CBN to float at least one OMO auction to mop-up excess liquidity. Also, the reduced number of trading days due to the New Year holiday should dampen trading activity for the week. Meanwhile, we expect the non-bank local investors to continue to position at the short end of the curve to reinvest proceeds.
Bond Market: Eurobond players in holiday mood.
During the prior week, we saw strong demand for FGN bonds, as local investors took position ahead of the expected liquidity inflow. The activities were concentrated at the mid-to-long-end of the yield curve. Notably, the 2027s, 2028s, 2036s, and 2049s were most actively traded maturities for the week. Overall, average yields declined by 24bps w/w, to settle at 10.8percent.
Elsewhere, activities at the secondary Eurobond market was lethargic as most market participants have closed their books for the year. Consequently, average yield across the sovereign yield curve remained static at 6.3percent. However, we saw little activity at the corporate segment on Monday as some market players hunted for bargains. Consequently, average yields at corporate Eurobond segment was down by 4bps w/w to 6.3percent.
This week, we expect market liquidity to continue to stimulate demand at the secondary bond market. Meanwhile, we expect activities at the Eurobond segment to remain lackluster as investors remain in the New Year holiday mood.
