BY BAMIDELE FAMOOFO
The Nigerian equities market mirrored the downbeat mood across global stocks, as investors booked profits on bellwether stocks.
Precisely, the All-Share index shed 0.9 percent to close at 49,026.62 points. The downturn was impacted by losses in BUACEMENT (-10.4%), TOTAL (-10.0%), GUINNESS (-5.6%), GTCO (-4.6%) and SEPLAT (-3.9%) stocks. Consequently, the MTD loss increased to -1.6 percent, while the YTD gain moderated to +14.8 percent.
Activity levels were mixed, as trading volume declined by 21.8% w/w while value traded increased by 17.8 percent w/w. Sectoral performance was broadly negative following losses in the Oil & Gas (-4.7%), Industrial Goods (-3.9%), Insurance (-2.1%), and Consumer Goods (-0.2%) indices. The Banking (+2.1%) index was the sole gainer of the week.
Stock market pundits believe investors will be focused on the outcome of the MPC meeting scheduled to hold this week to gain further clarity on the movement of yields in the fixed income market. As a result, Cordros Research envisaged an extension of the cautious trading theme, especially from domestic investors. Notwithstanding, the experts reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.
The overnight (OVN) rate oscillated in the double-digit region through the week in the money market, eventually rising by 483bps w/w to close at 15.0 percent on lower system liquidity. Notably, the average liquidity level for the week settled lower at a net short position of N26.87 billion (vs N212.55 billion in the previous week) as debits for the FGN bond (N261.50 billion) and FX auctions offset inflow from FGN bond coupon payments (N157.84 billion).
Financial experts expect the OVN rate to maintain its upward trend this week as they believe the outflow from CBN’s auctions (OMO, NTB & FX) and possible CRR debits may outweigh the expected inflow from FGN bond coupon payments (N131.20 billion).
Bullish sentiments persisted in the Treasury bills secondary market last week as the ample system liquidity, specifically at the beginning of the week, supported participants’ demand for bills. As a result, the average yield across all instruments contracted by 37bps to 8.0 percent – the average yield at the OMO segment dipped by 113bps to 9.4 percent and contracted by 15bps to 7.4 percent at the NTB segment.
“Following the expected tighter liquidity in the system this week, we expect bearish sentiments to dominate the T-bills market and drive higher yields. Also, we expect market focus to be shifted to the NTB PMA holding on Wednesday (28 September), with the CBN expected to roll over NGN141.34 billion worth of instruments,” Cordros Research hinted.
Elsewhere, trading in the Treasury bonds secondary market ended on a bearish note as investors re-priced bonds in anticipation of the MPC meeting scheduled to hold Monday and Tuesday this week. Consequently, the average yield expanded by 15bps to 12.9 percent.
Across the benchmark curve, the average yield expanded at the short (+41bps), and long (+7bps) ends following investors’ profit-taking activities on the MAR-2024 (+110bps) and APR-2037 (+76bps) bonds, respectively; but was unchanged at the mid segment.
The DMO conducted the September 2022 FGN bond PMA on Monday (19 September). At this auction, instruments worth N225.00 billion were offered to investors through the reopening of the 13.53 percent MAR 2025 (Bid-to-offer: 0.6x; Stop rate: 13.50%), 12.50 percent APR 2032 bond (Bid-to-offer: 0.8x; Stop rate: 13.85%) and 16.25 percent APR 2037 (Bid-to-offer: 1.9x; Stop rate: 14.5%). Total subscriptions across the offer instruments settled at N246.43 billion, with the DMO eventually allotting instruments worth N229.20 billion, resulting in a bid-coverage ratio of 1.1x.
Cordros maintained its view of an uptick in bond yields in the medium term, as the FGN’s borrowing plan for 2022FY and expected fiscal deficit point towards an elevated supply.
Nigeria’s FX reserves decreased for the third consecutive week, falling by USD162.89 million w/w to USD38.49 billion (22 September).
Across the FX windows, the naira was flat at N436.33/USD at the I&E window but depreciated by 0.4 percent to N712.00/USD at the parallel market. At the IEW, total turnover (as of 22 September) increased by 1.9 percent WTD to USD421.81 million, with trades consummated within the N425.00 – N453.03/USD band. In the Forwards market, the naira weakened at the 1-month (-0.8% to N439.24/USD), 3-months (-0.9% to N444.21/USD), 6-months (-1.1% to N457.57/USD) and 1-year (-1.7% to N484.03/USD) contracts.
