Investor

Nigerian equities market delivered the highest return among peers

by Editor

July 6, 2017 | 12:15 am
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The All Share Index (ASI) added 3.1% week-on-week (w/w), ending H1-2017 +23.2% higher to settle at 32,117.5 points. Also, market capitalization advanced N344.2bn to settle at N11.5tn.

Performance in second-quarter (Q2)-2017 which ended in the prior week was driven by renewed optimism in the Nigerian bourse following a combination of FX market reforms which triggered an influx of foreign portfolio inflows amid increasing prospect of economic recovery.

Market performance in the week to 30th June was also attributable to a rebound in oil prices with rose +5.2% w/w to $47.9 per barrel. In this past holiday-shortened week, system liquidity opened N317.1bn long. This was further boosted by OMO maturity of N236.0bn during the week. Despite an aggressive OMO mop up which removed c.85.8bn from the system in tranches of N53.8bn and N32.0bn, money market (MM) rates eased on a w/w basis.

As such, Open Buy Back (OBB) and Overnight (ON) rates closed the week at 5.8% and 5.3%, from 9.1% and 8.5% at the end of the previous week. Performance in H2-2017 will be driven by the consistency and stability of government policies, sustained improvement in macro variables, corporate announcements as well as the trajectory of commodity prices which typically anchor capital flow in Frontier markets.

We see a mixed close for the FI markets this week, with yields most likely reflecting system liquidity dynamics amid CBN’s intervention at both forward and spot FX market.

Global stocks end H1-17 bullish despite political anxieties

Equity indices around the World closed the first half of the year broadly bullish despite jitters in the social and geopolitical environment. Interestingly, the Nigerian equities market delivered the highest return amongst the markets under coverage across regions, rising +23.2% YTD on renewed Foreign Portfolio Investors’ interest in the country.

Similarly, equity indices in the US led peers in the advanced economies with the tech-heavy NASDAQ appreciating the fastest at 14.1% YTD amid Fed’s policy normalization and fiscal optimism. On the other hand, the UK FTSE underperformed peers, up 3.8% YTD amid socio-economic cum political uncertainties.

Nevertheless, all indices the US market delivered weekly losses in the week to 30th June, as investors grappled with mixed economic data amid developments around President Trump’s health-care bill. As such, the tech-laden NASDAQ shed -2.0%, the S&P 500 traded -0.3% lower and the Dow Jones Industrial Average dropped out -0.2%.

Eurozone shares also logged weekly losses as a worldwide cyber-attack and the debate about Trump’s health-care bill weighed sentiment. The UK’s FTSE declined -1.5%, Germany’s DAX tumbled -3.2%, France CAC fell -2.8% while the pan-European STOXX 600 depreciated -2.1%.

Performance across the BRICS classification was, however, bullish as oil prices rebounded +5.2% w/w to $47.9/b amid weaker production volumes in the US. Save for the Indian BSE Sensex (-1.2%), other indices such as Russia’s RTS (+1.2%), Brazil’s IBOV (+3.1%), South Africa’s JSE (+0.2%) and China’s SCHOMP (+1.1%) saw a bullish week.

Domestic Financial Markets Review and Outlook

The market also witnessed a sector-wide uptrend in H1-17 with the Banking sector index outperforming other sector indices in the period, up 45.1% on account of UBA (+94.7%), STANBIC (+120.0%), FBNH(+90.5%) and GUARANTY (41.0%). The Industrial (21.1%) and Consumer (11.6%) Goods indices followed on the back of gains in FLOURMILS (+46.0%), NESTLE (+11.3%) NB (+8.8%), PZ (+58.1%), DANGCEM (+178%) and WAPCO (+22.1%).

In the week to 30th of June-17, Industrials (+4.6%) led advancers amid a -sector-wide bullish trend. Financials [Banking (+3.0%) & Insurance (+0.1%)], Consumer Goods (+2.5%) and the Oil and Gas (+1.0%) indices were upbeat as bargain hunters took position in ZENITH (+2.8%), UBA (+5.3%), GUARANTY (+0.9%), ACCESS (+5.0%), FBNH (+8.3%), DANGCEM (+4.8%), WAPCO (+2.9%), PZ (+9.7%), NB (+6.0%), OANDO (+0.8%), MOBIL (+0.8%), SEPLAT (+1.1%) and TOTAL (+2.9%).

Investor sentiment was upbeat as market breadth came in at 1.6x (relative to 0.5x in the previous week). 32 stocks appreciated against 20 decliners. Activity level closed the week weaker as average value and volume traded eased 22.3% and 15.6% w/w to N3.8b and 390.4 units respectively. Performance in H2-2017 will be driven by the consistency and stability of government policies, sustained improvement in macro variables, corporate announcements as well as the trajectory of commodity prices which typically anchor capital flow in Frontier markets.

Money Market: Rates price in system liquidity dynamics, ease w/w

In this past holiday-shortened week, system liquidity opened N317.1bn long. This was further boosted by OMO maturity of N236.0bn during the week. Despite an aggressive OMO mop up which removed c.85.8bn from the system in tranches of N53.8bn and N32.0bn, money market (MM) rates eased on a w/w basis. As such, Open Buy Back (OBB) and Overnight (ON) rates closed the week at 5.8% and 5.3%, from 9.1% and 8.5% at the end of the previous week. Going by the patterns of recent CBN actions and the level of system liquidity, we expect to see more OMO issuances this week. Thus, MM rates may close the week higher.

FI Market: Yields relay mixed trajectory

In the FI space, average yield across maturities relayed mixed sentiment w/w, specifically, profit-booking across maturities stoked a bearish close to the T-bills market as average yield rose 45bps w/w to close the week at 20.7%. However, average bonds yield was mostly flat, coming in at 16.2%. We see a mixed close for the FI markets this week, with yields most likely reflecting system liquidity dynamics amid CBN’s intervention at both forward and spot FX market.

Currency: Naira appreciates in the parallel market

At the spot market, the naira traded flat at N305.0USD. Parallel market rate appreciated by 41bps to 365/USD. However, the newly introduced Investors’ & Exporters’ window saw a depreciation of 1.2% to settle at N366.4/USD (vs. N362.2/USD in the previous week). Oil prices increased to $47.9/b from $45.4/b as U.S. oil-rig count marks the first fall in 24 weeks. We expect appreciation or otherwise of naira will remain tied to the spate of CBN’s intervention in the spot and forward markets as well as the improvement in the I&E FX window.


by Editor

July 6, 2017 | 12:15 am
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