14 June 2018 ( Lagos):

MSCI emerging markets currency Index- dipped below 50 week moving average

The U.S. Federal Reserve hiked base interest rates by 25bps to 2% yesterday and increased their 2018 rate hike forecast from three to four, signaling a quicker pace of monetary tightening. On the back of this, emerging market equities dipped amid fears of possible currency depreciation on the back of more hawkish U.S. monetary policy outlook. 

The MSCI Emerging Markets Currency Index tracking emerging market currencies fell below its 50-week moving average yesterday for the first time since December 2016, indicating downward pressure. Analysts anticipate the tighter Fed outlook may induce greater capital reversal from emerging markets even as the U.S. economy and yields grow in appeal. 

Financial Market Update

Stop rates rise at T-bills Primary Market Auction 

The CBN conducted a primary market auction yesterday offering and selling N181 billion across the 91DTM, 182DTM and 364DTM bills at respective stop rates of 10.20 %, 10.50 % and 11.50 % higher than rates at the last PMA (previous: 10.00 %, 10.30% and 11.00 %). Despite this, Interbank Call rate stayed flat at 15.17 %.

The T-bills space traded in a sideways pattern yesterday amidst mixed trading sentiment that saw yields trend in opposite directions. While yields on the 50DTM (-62bps to 12.88%) and 274DTM (-71bps to 13.63%) bills declined, yields on the 36DTM (+35bps to 12.86%) and 120DTM (+22bps to 12.73%) bills advanced. Similarly, sentiment in the bond space was varied with a midly bullish tilt as yields on benchmark bonds declined a meagre 1bp on average. Notably, while yield on the 15.54% FGN FEB 2020 bond advanced 12bps to settle at 13.00%, yield on the 16.39% FGN JAN 2022 bond moderated 14bps to settle at 13.16%.

Analysts foresee the CBN coming in with an OMO auction today in line with the prevailing trend amidst an expected liquidity inflow of N244 billion. As such, they expect another quiet trading session with a mildly bearish bias today.

Gains fizzle out on NSE, ASI loses 35bps 

The Nigerian bourse returned to negative territory at mid-week as more sizable lossess on Consumer and Banking stocks drove a 35bps moderation on the All-Share Index. 

The Industrial Goods (+17bps) managed to hold on to gains yesterday following a positive performance from ( CCNN ) (+377bps) while larger sector members stayed flat. The Consumer Goods (-60bps) sector however pared gains following declines in ( DANGSUGAR ) (-256bps) and ( NB ) (-179bps). Similarly, the Banking (-47bps) sector closed in the red on the back of losses in ( ZENITHBANK ) (-165bps) and ( UBA ) (-135bps). Meanwhile, the Oil & Gas closed relatively flat, notching a meagre 1bp gain after a marginal rise in ( ETERNA ) (+50bps). 

Market breadth turned even with 22 advances and 22 declines. 

Market Outlook 

Noting the streak of positive sessions recorded recently, it appears profit taking has become more sizeable in the equity space. Although analysts expect trading to remain largely mixed, they foresee a borderline bearish close in today’s trading session. 

Stock Watch

UBN has gained 17% in the last seven sessions. The stock currently trades at a price of N6.20 and has declined 21% YTD, compared to the positive 4% YTD return for the Banking sector. 

Corporate Disclosures 

United Capital Plc., announced the appointment of Peter Ashade as the new Group Chief Executive Officer subject to requisite regulatory approvals following the retirement of its Group C.E.O, Oluwatoyin Sanni effective June 30, 2018

Source: Vetiva Capital Management Limited.