BY BAMIDELE FAMOOFO
Gains in Presco Plc, GTCO Plc, International Breweries Plc and Okomu Oil Plc pushed the All-Share Index of the Nigerian Exchange Limited higher by 0.4 percent to 47,437.48 points.
Based on the preceding, the Month -to -Date (MTD) return turned positive for investors at 0.1 percent while the Year-to-Date (YTD) return increased to 11.1 percent.
Activity levels mirrored the overall market’s board gauge as trading volumes surged by 103.7 percent week on week (w/w) while trading value edged up by 0.3 percent w/w. Performance across sectors was mixed, as the Insurance (+2.7%) and Banking (+1.3%) indices recorded gains, while the Oil and Gas (-2.2%), Consumer Goods (-0.5%), and Industrial Goods (-0.1%) indices closed in the red.
This week, it is believed that investors will focus on the outcome of the bond auction and the Monetary Policy Committee (MPC) meeting to gain further clarity on the movement of yields in the Fixed Income market. As a result, we envisage cautious buying actions from dividend-yield-seeking investors amid intermittent profit-taking activities. Notwithstanding, Analysts reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.
In the review week at the Money market, overnight (OVN) rate expanded by 467bps w/w, to 9.67 percent, as late debits for Net NTB issuances (N114.57 billion), OMO (N40.00 billion) and FX auctions offset inflows from FGN bond coupon payments (N142.09 billion) and OMO maturities (N105.00 billion).
Stock market Analysts disclosed that they expect the OVN rate to trend northwards, as outflows for next week’s auctions (FX and FGN bond) and arbitrary CRR debits, if any, are likely to offset the inflows from OMO maturities (N105.00 billion) and FGN bond coupon payments (N37.72 billion).
Proceedings in the Treasury bills secondary market closed the week on a bullish note as the healthy system liquidity fostered demand for short to mid-dated bills. However, some level of inactivity in the early part of the week was observed, with market participants shifting their focus to the PMAs in both market segments. Against the preceding, the average yield across all instruments declined by 11bps to 3.4 percent. Across the market segments, the average yield fell by 30bps and 13bps to 3.6 percent and 3.3 percent at the OMO and NTB segments, respectively.
In the review week, at the OMO auction, the CBN sold N40.00 billion worth of bills to market participants and maintained stop rates across the three tenors, as with previous auctions. At the NTB auction, the CBN offered N58.04 billion – N960.66 million of the 91-day, N3.61 billion of the 182-day, and N53.46 billion of the 364-day – in bills. Ultimately, the CBN allotted N172.61 billion – N5.91 billion of the 91-day, N6.85 billion of the 182-day and N159.85 billion of the 364-day bills – at respective stop rates of 1.74 percent (previously 1.75%), 3.00 percent (previously 3.28%), and 4.00 percent (previously 4.10%).
With system liquidity expected to tighten this week, Analysts envisage an increase in the average yields on T-bills from current levels.
The Treasury bonds secondary market retraced last week and turned bearish, as only a handful of trades were consummated following weakened demand.
“We suspect that investors held on to idle funds in anticipation of next week’s PMA. Accordingly, the average yield expanded by 10bps to 10.5%. Across the benchmark curve, despite the weakened activity levels, we still witnessed cherry-picking on attractive mid- to long-dated instruments. Precisely, the average yield across the curve declined at the short (-22bps), mid (-27bps) and long (-8bps) segments as investors demanded the APR-2023 (-154bps), JUL-2034 (-45bps) and MAR-2036 (-33bps) bonds, respectively,” Cordros Research disclosed.
“This week, we expect the outcome of the March 2022 FGN auction holding on Monday (March 21) to influence the direction of yields in the bonds secondary market. At the auction, the DMO is offering instruments worth N150.00 billion through re-openings of the 12.5000% FGN JAN 2026 and 13.0000% FGN JAN 2042 bonds. We maintain our yield uptick stance in the medium term, as the FGN’s borrowing plan (N2.57 trillion) for 2022FY points to elevated supply,” analysts hinted.
At the foreign exchange market, Nigeria’s FX reserves sustained its descent as it declined by USD39.40 million w/w to USD39.70 billion (March 16 2022). Meanwhile, the naira was flat at N416.67/USD and N578.00/USD at the I&E window (IEW) and parallel market, respectively. At the IEW, total turnover (as of March 17 2022) declined by 27.2 percent WTD to USD507.94 million, with trades consummated within the N410.00 – N453.25/USD band. In the Forwards market, the naira appreciated at the 1-month (+0.1% to N418.80/USD), 3-months (+0.2% to N424.34/USD), 6-months (+0.4% to N433.42/USD) and 1-year (+1.3% to N449.67/USD) contracts.
