SAT, 19 SEPT 2020-theGBJournal-Mixed trading continued on the local bourse amidst weak volumes and the absence of any positive catalysts, with the benchmark index closing marginally lower.
Banking stocks – ZENITHBANK (-1.2%), STANBIC (-1.3%), ETI (-4.8%) and FBNH (-2.0%) – were the major drivers of the drop as the NSE All-Share Index depreciated by 0.08% while Market Capitalization appreciated by 0.10% to close the week at 25,572.57 and N13.365 trillion respectively. Consequently, the MTD gain declined to 1.0%, while the YTD loss increased to -4.7%.
Trading in the top three equities namely FBN Holdings Plc, Guaranty Trust Bank Plc and Access Bank Plc. (measured by volume) accounted for 353.048 million shares worth N4.018 billion in 3,095 deals, contributing 31.00% and 31.66% to the total equity turnover volume and value respectively.
Performance across sectors within our coverage was mixed with the Banking (-0.7%) and Oil & Gas (-1.0%) indices declining, while the Industrial Goods (+0.5%), and Consumer Goods (+0.1%) indices closed marginally higher. The Insurance index closed flat.
In the absence of a positive catalyst, and given the still uninspiring macro story, we guide investors to trade cautiously in the short term.
However, Cordros Research analysts say they expect the market might benefit over the longer term on compelling valuations and as investors seek alpha-yielding opportunities in the face of negative real returns in the fixed income market.
Money market
The overnight (OVN) rate plummeted by 13.50ppts to 3.0%, as inflows from OMO maturities (NGN350.00 billion) and FGN bond coupon payments (NGN142.09 billion) improved the level of liquidity in the system.
Barring any significant drawdown from the system next week, we expect the OVN to remain low, as a combined NGN318.12 billion comes into the system from OMO maturities (NGN300.00 billion) and FGN bond coupon payments (NGN18.12 billion).
Treasury bills
The overall Treasury bills secondary market was bullish, as the ample liquidity in the system drove demand for instruments. Thus, the average yield across all instruments contracted by 13bps to 2.0%. Across the segments, the bullish performance of OMO segment (contracted by 14bps to 2.3%) was sustained from last week, despite the reduced trading volumes, as local participants took positions in short to mid tenor instruments. Similarly, trading was bullish at the NTB market (contracted by 12bps to 1.6%), as market participants covered for lost bids at the auction.
At the PMA, demand continued to outweigh supply, as there was an oversubscription of 1.3x on the NGN158.75 billion worth of bills on offer. The auction closed with the CBN allotting NGN2.00 billion of the 91-day, NGN8.39 billion of the 182-day and NGN148.36 billion of the 364-day – at respective stop rates of 1.09% (previously 1.10%), 1.50% (previously 1.55%), and 3.05% (unchanged).
We expect similar sentiments in the T-bills market next week, following the level of inflows expected in the system.
Bonds
The trading activities in the Treasury bonds secondary market remained bullish this week, despite an uptick in the headline inflation, as the average yield across instruments contracted by 51bps to 7.6%. The performance was driven by investors re-investing maturities and coupon payments in the space. Across the curve, yield contracted at the short (-102bps), mid (-23bps) and long (-26bps) segments of the curve, MAR-2024 (-187bps), FEB-2028 (-47bps) and JUL-2034 (-41bps) bonds, respectively.
Next week, we expect investors’ focus to be shifted to the PMA on Wednesday, as the DMO is set to offer instruments worth NGN145.00 billion through re-openings of the 12.50% JAN 2026, 12.50% MAR 2035, 9.80% JUL 2045 and 12.98% MAR 2050 bonds. Nonetheless, we still expect some activity at the secondary market as investors cover lost bids from the auction, which is likely to be oversubscribed.
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