SAT, FEB 15 2020-theG&BJournal- During the week markets were temperamental. Sentiments in the domestic equities were weak. consequently, the All-Share Index plunged by 1.11% to 27,755.87 points – the third consecutive weekly decline, as investors dumped NESTLE, MTNN, and GUINNESS stocks. Consequently, the YTD and MTD returns settled at 3.4% and -2.7%, respectively.
In response, the YTD and MTD returns settled at 3.4% and -2.7%, respectively. The significant losses recorded in the Consumer Goods (-6.5%) and Insurance (-2.2%) sectors weighed on the market performance, as both indices declined. The Oil and Gas (-0.7%) and Banking (-0.2%) indices also followed suit. The Industrial Goods (+0.78%) index was the sole gainer.
‘’ In our view, the trend witnessed this week is likely to persist, as weakening market sentiment and the absence of positive catalysts are expected to pressure market returns. Nonetheless, we advise investors to take positions in fundamentally justified stocks,’’ analysts at Cordros Securities said.
In the Fixed Income Market, the overnight (OVN) rate contracted by 308bps, w/w, to 3.3%. Activities in the treasury bills market turned bullish as the average yield across all instruments contracted by 26bps to 10.2% amidst buoyant system liquidity while trading in the FGN bond secondary market was bullish as investors sought to reinvest their inflows from OMO and FEB-2020 bond maturities.
However, liquidity is expected to remain buoyant in the coming week, supported by inflows from OMO maturities (NGN627.22 billion) on the 20th. However, outflows for the upcoming bond auction, FX auctions and OMO auctions are likely to squeeze system liquidity towards the end of the week. In effect, we expect an expansion in the OVN rate.
Nigeria’s FX reserves declined by USD362.11 million WTD to USD37.30 billion (12th Feb 2019) as the CBN maintained its support for the currency via its weekly FX interventions; USD210.00 million was sold across the different segments of the FX market – USD100.00 million to the Wholesale segment, USD55.00 million to the SMEs segment, and USD55.00 million to the Invisibles segment.
Despite this, the naira weakened by 0.1% w/w at the I&E window to NGN364.37/USD but closed flat at NGN360/USD in the parallel market. In the forwards market, the naira weakened across the 1-month (-0.1% to NGN367.42/USD), 3-month (-0.1% to NGN372.57/USD) and 6-month (-1.0% to NGN380.10/USD) contracts, while the rates on the 1- year (0.1% to NGN399.38/USD) contract appreciated.
Activities in the treasury bills market turned bullish as the average yield across all instruments contracted by 26bps to 10.2% amidst buoyant system liquidity. The average yield in the OMO segment of the market contracted by 28bps to 13.3% ; average yield in the NTB market also contracted by the 6bps to 3.8%.
At week’s NTB primary auction, the CBN fully allotted NGN154.38 billion worth of bills – NGN4.38 billion of the 91-day, NGN10.00 billion of the 182-day and NGN140.00 billion of the 364-day – at respective stop rates of 3.00% (previously 3.50%), 4.00% (previously 4.50%), and 6.54% (previously 6.50%).
‘’With liquidity still buoyant, we expect trading volumes to increase in the coming week. Thus we expect yields in the treasury bills market to contract,’’ Cordros Securities projects.
Trading in the FGN bond secondary market was bullish as well as investors sought to reinvest their inflows from OMO and FEB-2020 bond maturities. Consequently, the average yield across instruments contracted by 6bps to close at 10.1%. Buying interest was seen across the mid (-5bps) and long (-15bps) segments, with yields on the APR-2029 (-5bps) and APR-2037 (-31bps) recording the largest expansions, respectively.
The DMO will hold a PMA on the 19th of February wherein NGN140.00 billion across three instruments will be offered to investors, all through re-openings – 12.75% APR 2023, 14.55% APR 2029, and 14.80% APR 2049 bond.
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