Data from the Pension Commission (PenCom) for Q1’18 shows that Pension Fund Administrators (PFA) have marginally increased their allocations to domestic equities – from 8.9% as at the end of 2017 to 9.3% at the end of March 2018. We recall that the PenCom multi-fund guidelines rolled out early last year (to be implemented from H2’18) nudges PFAs to increase their participation in equities and other variable income instruments. We expect the implementation of the guideline, as well as the positive medium-term outlook for Nigerian equities, to boost PFA participation in the market going forward. 

Bond yields advance amidst PMA 

• Yesterday, the DMO sold N50 billion (offer: N70 billion) at the bond auction across the 5-year, 7-year and 10-year tenors at stop rates of 13.50%, 13.50% and 13.55% (previous: 12.75%, 12.85% and 12.89%) respectively. Amidst this, the Interbank Call rate declined from 17.00% to 16.67%. 

• Meanwhile, sentiment turned bearish in the secondary bond market, with yields on benchmark bonds advancing 7bps on average. Notably, yields on the 16.00% FGN JUN 2019, 15.54% FGN FEB 2020, and 14.50% FGN JUL 2021 bonds advanced 49bps, 49bps and 12bps to settle at 12.23%, 13.08% and 13.59% respectively. However, trading was mixed across the T-bills market, albeit with yields rising 6bps on average. In particular, whilst declines were observed on the 36DTM (-38bps to 11.44%) and 302DTM (-53bps to 13.48%) bills, the 50DTM (+26bps to 12.43%) and 295DTM (119bps to 14.09) bills advanced. 

• In line with the recent trend, we expect the CBN to conduct an OMO auction today to mop-up the expected liquidity inflow of N267 billion. Consequently, we anticipate mixed trading today amidst tightened system liquidity.
  

Nigerian Stock Exchange continues under 

• With all key sectors save for the Oil & gas sector closing in the red, the Nigerian bourse shed another 25bps yesterday, extending losses to five sessions. 

• The Oil & Gas sector rose 8bps yesterday – sole gainer – after a 487bps gain in MRSOIL (+487bps) overshadowed JAPAULOIL (-357bps). On the other hand, the Consumer Goods (-47bps) sector was the biggest loser as declines in DANGFLOUR (-474bps), DANGSUGAR (-247bps) and NB (-65bps) dragged the sector. Also, the Banking (-17bps) and Industrial Goods (-10bps) sectors closed in the red, on the back of losses in ETI (-220bps), ACCESS (-46bps), and CAP (-288bps).

• Market breadth stayed negative with 16 advances and 28 declines. 

Market Outlook 

• Market yesterday continued its bearish streak with all market indicators negative (red sector closes, negative market breadth and downsloping intraday trading). Thus, we foresee negative sentiment persisting today. 

• Stock Watch: 

Following the lifting of a 19-month technical suspension on IKEJAHOTEL, the stock has rallied 26% over the last three sessions. The stock currently trades at a price of N2.24 and has returned 26% MRS ytd.