BY BAMIDELE FAMOOFO
Though the local bourse started the week on a sour note, positive sentiments returned to the market as investors renewed buying interests in bellwether (leading) stocks.
Pertinently, the All-Share Index ended the week 1.3 percent higher, settling at 48,156.56 points. Gains in MTNN (+4.8%), AIRTELAFRI (+2.6%) and GTCO (+7.0%) underpinned the market’s performance. Based on the preceding, the YTD gain settled higher at +12.7 percent.
Activity levels were mixed, as trading volume increased by 16.4 percent w/w while trading value declined by 19.5 percent w/w.
Analyzing by sectors, the Banking (+1.2%), Insurance (+1.1%), and Oil and Gas (+0.4%) indices advanced, while the Industrial Goods (-1.2%) and Consumer Goods (-0.6%) indices declined.
This week, stock market analysts expect market performance to be dominated by the bulls, as positioning by early birds in dividend-paying stocks ahead of 2022FY dividend declarations should outweigh profit-taking activities.
However, they reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.
At the money market and fixed income market, last week, the overnight (OVN) rate expanded by 38bps to 13.0 percent , as the inflows from FGN bond coupon payment (NGN5.63 billion) and OMO maturities (NGN25.00 billion) were insufficient to sustain the system liquidity. Notwithstanding, Cordros Research noted that the average system liquidity settled higher, printing a net long position of NGN146.41 billion (vs a net long position of NGN24.11 billion in the previous week).
“Barring any significant inflow to the financial system coupled with expected outflows for (NTB, OMO & FX) auctions next week, we expect the OVN rate to trend upward from current levels,” analysts at Cordros noted.
The Treasury bills secondary market closed the review week on a bearish note despite the improved system liquidity. We attribute this week’s bearish sentiments to participants taking profits from their positions in anticipation of the NTB PMA scheduled to hold this week.
As a result, the average yields across all instruments expanded by 26bps to 10.8 percent.
Across the segments, the average yield increased by 32bps to 11.0 percent at the NTB secondary markets, but contracted by 2bps to 10.1 percent at the OMO segment.
This week, experts expect the yields on T-bills to maintain the same trajectory, following the expected tight system liquidity.
Also, they believe participants will shift focus to this week’s NTB PMA, as the CBN is set to roll over NGN54.36 billion worth of maturities.
Activities in the FGN bonds secondary market were bullish as investors’ cautiously cherry-picked instruments with attractive yields across the curve.
As a result, the average yield across instruments contracted by 10bps to 14.3 percent .
Across the benchmark curve, the average yield contracted at the short (-30bps) and long (-3bps) ends following demand on the MAR-2027 (-55bps) and MAR-2036 (-26bps) bonds, respectively. Conversely, the average yield expanded at the mid (+4bps) segment as investors sold off the APR-2032 (+8bps) bond.
Cordros maintained its view of an uptick in bond yields in the medium term, as the FGN’s borrowing plan for 2023FY and expected fiscal deficit point towards an elevated supply.
Meanwhile, Nigeria’s FX reserve recorded another decline for thirteen consecutive weeks in the review period, dipping by USD59.56 million w/w to USD37.11 billion (30 November). Across the FX windows, the naira appreciated by 0.2 percent to NGN445.33/USD at the I&E window (IEW).
At the I&E window, total turnover (as of 01 December 2022) fell by 14.8 percent WTD to USD460.25 million, with trades consummated within the NGN410.00 – 444.00/USD band. In the Forwards market, the rate weakened at the 1-month (-1.8% to NGN460.03/USD), 3-month (-2.7% to NGN471.58/USD), 6-Month (-3.1% to NGN491.30/USD) and 1-year (-4.3% to NGN473.02/USD) contracts.
Cordros hinted that the FX liquidity issues will remain over the short-to-medium term in the absence of any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels.
