BY BAMIDELE FAMOOFO
Negative sentiments dominated trading activities in the Nigerian equities market as the All-Share Index dipped by 0.5 percent week on week (w/w) to close at 51,557.41 points.
Particularly, sell-offs in INTBREW (-14.3%), UBN (-9.8%), FBNH (-8.6%), FCMB (-7.5%), and NASCON (-6.4%) led the weekly loss. Consequently, the month to date (MTD) and year to date (YTD) returns settled at -0.5 percent and +20.7 percent, respectively. Likewise, activity levels were weaker than the prior week, as trading volume and value declined by 39.0 percent w/w and 57.7 percent w/w, respectively.
Sectoral performance was largely bearish, following losses in the Insurance (-2.7%), Banking (-0.5%), Consumer Goods (-0.5%), and Oil and Gas (-0.1%) indices. The Industrial Goods index closed flat.
With the moderation in the prices of bellwether stocks last week, savvy investors are expected to take advantage of this and make re-entry ahead of the H1-22 earnings season.
“However, we do not rule out the possibility of continued profit-taking activities. As a result, we think the local bourse will likely exhibit a choppy pattern. Therefore, we advise investors to take positions in only fundamentally justified stocks,” Analysts at Cordros Research hinted.
The overnight (OVN) rate in the money market was unchanged at 14.0 percent in the review week, as the funding conditions in the system deteriorated further, with system liquidity closing the week in a net short position of N127.41 billion (vs a net short position of N168.26 billion in the prior week).
Cordros said it expects the OVN rate to remain elevated in the coming week, as expected outflows for CBN’s auctions (NTB, FX & OMO) are likely to pressure the system further in the absence of any significant inflow into the financial system.
“The Treasury bills secondary market ended the week on a bearish note, as the average yield across all instruments expanded by 131bps to 6.7 percent. We attribute the bearish performance to the sustained sell-offs on short- and mid-dated bills as the dearth in liquidity persists. Across the segments, average yield expanded by 142bps and 98bps to 6.8 percent and 6.3 percent at the NTB and OMO secondary markets, respectively.
“As we anticipate another liquidity squeeze, we expect T-bills yields to maintain their uptrend. Also, we expect quiet trading at the NTB segment as participants position for next week’s PMA, with N143.27 billion worth of maturities on offer,” experts disclosed.
The Treasury bonds secondary market remained bearish in the review week as investors sold off positions across the curve in anticipation of an uptrend in bond market yield. As a result, the average yield across all instruments inched higher by 11bps to 11.3 percent. Across the benchmark curve, short (+34bps), mid (+4bps) and long (+5bps) dated instruments were at the brunt of the sell-offs as investors took profit off the APR-2023 (+98bps), FEB-2028 (+10bps), and APR-2049 (+16bps) bonds, respectively.
Experts maintain their expectation of an uptick in FGN bond yields in the medium term as the FGN’s borrowing plan for 2022FY and expected fiscal deficit point towards an elevated supply.
Last week, Nigeria’s FX reserve recorded another accretion, growing by USD170.75 million w/w to USD39.34 billion (07 July 2022). Across the FX windows, the naira depreciated by 0.3 percent w/w to N426.13/USD at the I&E window and by 0.3 percent to N617.00/USD in the parallel market. At the I&E window, total turnover (as of 07 July) declined by 19.3 percent WTD to USD507.02 million, with trades consummated within the N410.00 – N450.58/USD band. In the Forwards market, the naira weakened across the 1-month (-0.7% to N427.55/USD), 3-month (-0.8% to N435.52/USD), 6-month (-1.2% to N449.17/USD), and 1-year (-1.1% to N472.14/USD) contracts.
