BY BAMIDELE FAMOOFO
The local bourse extended its bullish momentum for the fourth consecutive week, primarily driven by the gains recorded by top cement player; BUACEMENT (+19.1%).
Thus, the All-Share index closed the week 1.5 percent higher at 48,881.93 points, with the MTD and YTD gains advancing to +2.6 percent and +14.4 percent, respectively.
Activity levels mirrored the market’s broad gauge as trading volume and value surged by 45.8 percent and 22.8 percent w/w, respectively.
Across sectors, the Industrial Goods (+8.5%) index recorded the most significant gain, followed by Consumer Goods (+1.6%), Insurance (+1.3%), and Oil and Gas (+0.3%) indices.
The Banking (-0.1%) index was the sole loser for the week.
Stock analysts expect the bulls to retain their dominance as buying activities due to positioning for 2022FY dividends will likely suppress selling activities.
“In addition, we believe the outcome of the bond auction scheduled to hold next week will also shape market sentiments. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings,” experts at Cordros Research noted.
Last week at the money market, the overnight (OVN) rate increased by 113bps w/w to 14.1 percent, as the debit for net NTB issuance (N50.00 billion) pressured the financial system. Notwithstanding, we note that the average liquidity level closed higher at a net long position of N217.51 billion (vs net long position of NGN146.41 billion in the previous week).
This week, experts expect an upward shift in the OVN rate as the outflows for next week’s auctions (FGN bonds, OMO & FX) and possible CRR debits will pressure the system liquidity.
Meanwhile, trading in the Treasury bills secondary market sustained the previous week’s bullish sentiment, as the average yield across all instruments contracted by 202bps to 8.8 percent.
Last week’s bullish sentiments were driven by participants looking to the secondary market to cover lost bids at the NTB PMA.
Across the market segments, the average yield dipped at the NTB and OMO segments by 252bps to 8.5 percent and 2bps to 10.1 percent, respectively.
At the reviewed week’s NTB PMA, the CBN offered N54.36 billion – N1.03 billion of the 91-day, N1.94 billion of the 182-day, and N51.39 billion of the 364-day – in bills.
At the auction, demand was higher at a total subscription level of N728.57 billion, with more demand skewed toward the longer-dated bills (N722.23 billion translating to 99.1 percent of the total subscription).
Eventually, the CBN allotted N104.36 billion – N1.03 billion of the 91-day, N1.94 billion of the 182-day, and N101.39 billion of the 364-day – at respective stop rates of 6.49 percent (previously: 6.50%), 8.00 percent (previously: 8.05%), and 13.05 percent (previously: 14.84%).
Given the expected tight liquidity in the system this week, analysts anticipate increasing T-bills yields from current levels.
Bullish sentiments persisted in the treasury bonds secondary market as local investors continued to scout for attractive bonds across the short and long spectrum.
Consequently, the average yield dipped by 19bps w/w to 14.1 percent.
Across the benchmark curve, the average yield contracted at the short (-64bps) and long (-4bps) ends, following bargain hunting on the APR-2023 (-249bps) and MAR-2035 (-32bps) bonds, respectively. Meanwhile, the average yield expanded at the mid (+6bps) segment as investors sold off the NOV-2029 (+8bps) bond.
“This week, we expect the outcome of the December 2022 FGN bond auction holding on Monday (December 12) to influence the direction of yields in the secondary market. At the auction, the DMO is offering instruments worth NGN225.00 billion through re-openings of the 14.55% FGN APR 2029 bond, 12.50% FGN APR 2032, and 16.25% FGN APR 2037 bonds. We maintain our 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,” Cordros projected.
Nigeria’s FX reserves remained pressured during the review week, declining by $112.75 million w/w to $36.96 billion (December 08).
As a result, the naira depreciated by 0.3 percent to NGN446.50/$, at the I&E window (IEW).
At the IEW, total turnover (as of 08 December 2022) declined by 80.2% WTD to $15.67 million, with trades consummated within the NGN455.06 – NGN460.60/$ band. In the Forwards market, the naira was flat at the 1-month (NGN460.02/$) contract but appreciated at the 3-months (+0.4% to NGN469.86/$), 6-months (+0.4% to NGN489.33/$), and 1-year (+0.8% to NGN521.44/$) contracts.
