The equity market continued last week to plunge deeper into the negative region, reducing hopes of a near-term rebound as investors continued to price stocks lower, in absence of bold economic reforms.
The Nigerian Stock Exchange (NSE) All Share Index ( ASI) declined by 1.4percent week- on- week (w/w) to end the review week at 26,925.29 points, breaching the 27,000-support level.
Additionally, year-to-date (YTD) return touched a new low of – 14.3percent while market capitalisation shed N185.9billion to close the review week at N13.1trillion. Activity levels in the market were up, as average value and volume traded rose 45.1percent w/w and 12.1percent w/w respectively.
The slogan for the week was “downhill”, as all major sector indices closed the week at lower levels. The Consumer Goods (-6.6percent w/w) sector index plunged the most, owing to price declines in NESTLE (-10percent) and NASCON (-10percent). Also, the Oil & Gas (-1.9percent), Banking (-1.2percent), Industrial Goods (-1.2percent) and Insurance (-3.9percent) sector indices trended southwards, dragged by sell- offs in OANDO (- 9.5percent), STANBIC (- 13.4percent), WAPCO (- 6.7percent) and WAPIC (-10.3percent) respectively.
Notably, GUARANTY released its first-half (H1) 2019 financial results. According to the report, Gross Earnings declined by 2.1percent y/y to N221.9billion while Profit Before Tax (PBT) inched higher by 5.6percent to N115.8billion. The bank declared an interim dividend of 30kobo/share. Consequently, we saw some buying interest in the stock, up 1percent after the result was release.
Investors sentiment improved slightly, as market breadth appreciated marginally to close at 0.5x as against the 0.3x recorded last week. This was as 15 stocks recorded price appreciation, while 33 stocks receded. This week, we expect sentiments to remain tepid as risk-off sentiment across the globe, culminated by sluggish domestic economic momentum dampens investors’ appetite for equities. However, the release of the outstanding Banks’ H1-19 earnings scorecard could possibly sway sentiments.
Money Market: Yields continue to trend higher was as bond coupon payment (N47.1billion), OMO maturity (N122.9billion), NTB maturity (N34.4billion) and retail FX refunds to banks provided a boost to the overall liquidity level while prompting a fresh OMO mop up by the CBN, worth N88.7bn. Furthermore, inflows from Nigerian Treasury Bills (NTB) maturity and retail FX refunds were later mopped up via NTB and retail FX funding sales. In all, average interbank funding rates –Open Buy Back (OBB) and Over Night (O/N) rates –trended higher from 12.5percent to 18.8percent.
At the NTB and OMO auctions, the apex bank sent stop rates higher, especially on the long-dated bills, to spur a continued patronage of offshore investors and ease the recent pressure on the naira.
At the secondary NTB market, market bears continued to dominate the bulls as market players sought to fund their winnings at the OMO auctions – selling down their low yielding bills.
Thus,onaw/wbasis,average yield spiked 128bps w/w to close the week at 13.6percent. This week, the major liquidity inflow is via an OMO maturity worth, N92.3billion. Elsewhere, at the secondary market, we envisage a continued pressure on yields occasioned by CBN‘S expression of willingness to maintain the attractiveness of fixed income securities.
Bond Market: Bearish sentiments remain dominant
Bearish sentiment s continued to cloud the secondary market in the prior week. This was as yields across the curve trended higher amid a continued selling interest from offshore investors. Consequently, average bond yield rose c. 43bps w/w to close the week at 14.2percent.
The recent selloffs within the market has been largely spurred by risk-off sentiments by foreign investors amid fears of recession in the developed market – signaled by the current inversion of the US and UK Treasury yield curves. Specifically, for Nigeria, players remained on the sidelines and stayed cautious due to regulatory uncertainties.
Elsewhere, interest in Nigerian sovereign Eurobonds wanes as investors priced the below $60/b crude oil price, negatively. Consequently, yields on FGN dollar bonds inched higher across the curve as the average yield was up by 32bps w/w to 6.7percent.
Similarly, interest in Corporate Eurobonds was weak as only SEPLAT saw a marginal decline in yield while the other corporate dollar notes, recorded increase in yields.
Consequently, the average yield for the corporate segment (excluding the now redeemed ECOBANK note) inched higher by 2bps to 5.5percent.
We maintain our recent outlook that uncertainties in both the global and domestic market as well as a below $60/barrels Brent price, will continue to keep foreign investors off naira notes. However, local investors will be looking to issuance at the primary market and fiscal policy pronouncements for guidance.
