BY BAMIDELE FAMOOFO
Investments in the equities market last week was unimpressive as market capitalization dropped by 0.67 percent to N25.31trillion due to profit-taking activities by investors on blue-chip stocks. The All-Share Index closed at 46,964.23 points.
In the review week, a total turnover of 1.176 billion shares worth N16.601 billion in 21,076 deals were traded in contrast to a total of 2.449 billion shares valued at N20.653 billion that exchanged hands the week before in 20,764 deals.
Stock market analysts at Cordros Securities unveiled the secret behind the dismal performance, noting that “the negative performance was due to bouts of profit-taking activities in heavyweight stocks, namely NESTLE (-2.8%), UBA (-2.6%), GTCO (-1.4%), MTNN (-0.7%), and LAFARGE (-0.6%).”
Based on the preceding, the month to date and year to date return, on the bourse settled at -0.9 percent and +9.9 percent, respectively. Activity levels were weaker than the prior week, as trading volumes and value declined by 52.0 percent week on week and 19.6 percent week on week, respectively.
The Financial Services Industry (measured by volume) led the activity chart with 954.472 million shares valued at N10.217 billion traded in 12,700 deals; thus contributing 81.14 percent and 61.55 percent to the total equity turnover volume and value respectively.
The Consumer Goods Industry followed with 63.728 million shares worth N3.439 billion in 2,720 deals.
The third place was The Conglomerates Industry, with a turnover of 53.313 million shares worth N258.568 million in 711 deals. Trading in the top three equities namely Fidelity Bank Plc, United Bank For Africa Plc, and Guaranty Trust Holding Company Plc (measured by volume) accounted for 456.971 million shares worth N4.469 billion in 4,982 deals, contributing 38.85 percent and 26.92 percent to the total equity turnover volume and value respectively.
In the week ahead, experts expect the market to trade sideways as the activities of bargain hunters in dividend-paying stocks fizzle out due to the winding down of the 2021FY earnings season.
“In addition, risk-averse investors will likely sustain profit-taking activities in anticipation of an uptick in FI yields. Notwithstanding, we reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings,” Cordros Research disclosed.
In the money market, overnight (OVN) rate contracted by 350bps w/w to 6.2 percent last week, as inflows from FAAC disbursements (N354.35 billion) and OMO maturities (N42.00 billion) outweighed debits for CRR, the FGN’s monthly bond (N297.01 billion) and CBN’s weekly FX auctions.
This week, experts said they expect the OVN rate to remain elevated in the double-digit region as expected inflows from OMO maturities (N10.00 billion) and FGN bond coupons (N40.77 billion) are likely to be offset by funding pressures for next week’s auctions (NTB, OMO and FX).
Although the Treasury bills secondary market started the trading week in a lull, it ended on a bullish note, as market participants reacted to the declining marginal rates at the last FGN bonds primary market auction (PMA).
Consequently, average yield across all instruments declined by 7bps to 3.3 percent.
Across the market segments, the average yield contracted by 6bps to 3.2 percent at the NTB segment but closed flat at 3.6 percent at the OMO segment, possibly as market participants stayed on the sidelines in anticipation of an OMO auction. Notably, the CBN did not float an OMO auction in the review week for the first time this year after 20 consecutive weeks of regular auctions.
“In the coming week, we expect the outcome of the NTB auction to shape the direction of yields in the T-bills market. The CBN is set to roll over N143.29 billion worth of maturities to market participants at the auction.”
Also last week, trading in the Treasury bonds secondary market continued with bearish sentiments, following the lower demand observed across the curve as investors continued cherry-picking instruments with attractive yields. Consequently, the average yield expanded by 16bps to 10.7 percent.
Across the benchmark curve, the average yield expanded at the short (+19bps), mid (+13bps) and long (+18bps) segments following investors’ profit-taking activities on the MAR-2024 (+57bps), FEB-2028 (+24bps) and JUL-2045 (+84bps) bonds, respectively. At the bond auction on Monday, the DMO offered instruments worth NGN150.00 billion to investors through re-openings of the 12.50 percent FGN JAN 2026 (Bid-to-offer: 3.1x | Stop rate: 10.15 percent; previously 10.95%) and 13.00 percent FGN JAN 2042 (Bid-to-offer: 4.9x | Stop rate: 12.70 percent; previously 13.00%) bonds. As anticipated, demand was strong, with a subscription level of N598.42 billion – the highest subscription level recorded in the year – translating to a bid-to-offer ratio of 4.0x. The DMO eventually over-allotted instruments worth N297.01 billion (competitive allotments: N296.37 billion, non-competitive allotments: N0.64 billion), resulting in a bid-to-cover ratio of 2.0x.
