Effect of pre-election jitters on Equity Market and Bond Space   

04 July 2018 ( Lagos ) : Bears came in early, owing to the pre-election jitters. Coming off a relatively strong performance in Q1’18 (+8.5%), largely propelled by a 16% surge in January, the Nigerian equity market took a U-turn in Q2’18. The bearish trend was evident at the end of the first quarter (March: -4.2%), and market dipped a further 7.8% in Q2’18 on the back of pre-election jitters and amid a broader selloff in emerging market equities. 

Analysts note that this occurred despite signs of an improving economy – healthy macroeconomic indicators, strong oil prices and stable currency market. With Q3’18 kicking off with a 1.8% loss in the first two sessions, analyst don’t anticipate any respite for the market this quarter as uncertainty surrounding the upcoming elections becomes more pronounced. Moreover, they expect the risk-off sentiment towards emerging market equities to further weigh on the Nigerian market. 

Little activity in the Bonds space of the F.I market 

Amidst improved system liquidity and an absence of OMO auctions, Interbank Call rate declined to 19.33% yesterday (previous: 30.00%). 

Sentiment in the T-bills space remained sideways with a positive bias, with yields declining 9bps on average. Notably, yields on the 37DTM (- 28bps to 11.83%), 93DTM (-52bps to 11.92%) and 226DTM (-70bps to 12.88%) bills declined. In contrast, trading in the bond space was tepid, with a bearish bias as yields on benchmark bonds advanced 16bps on average. Notably, yields on the 14.50% FGN JUL 2021 and 14.20% FGN MAR 2024 bonds rose 81bps and 43bps to settle at 14.11% and 13.83% respectively. 

In the absence of any fresh offshore supply, analysts expect activity in the Bonds space to remain muted in today’s session. In the T-bills space, they expect investors to tread cautiously ahead of the primary market auction at which the CBN will be offering N171 billion across the 91DTM, 182DTM and 364DTM bills. 

Bears maintain upper hand in Equity market 

The Nigerian equity market continued to tip towards the sell-side extending losses by 90bps after all sectors closed in the red. 

The Industrial Goods (-151bps) and Banking (-125bps) sectors led the losers board yesterday, on the back of losses in WAPCO (-366bps), DANGCEM (-58bps), ZENITHBANK (-244bps) and GUARANTY (-100bps). Likewise, the Oil & Gas (-116bps) sector also closed under following declines in MOBIL (-495bps), ETERNA (-299bps) and FO (-219bps). The Consumer Goods (-109bps) sector also shed points after gains in UNILEVER (+476bps) and NB (+71bps) were wiped out by notable dips in DANGSUGAR (-447bps) and NESTLE (-413bps). 

Market breadth remained negative with 13 advances and 29 declines. 

Market Outlook 

Analysts expect bears to remain dominant in trading activities on the stock exchange at mid-week as all market indicators point to sustained weak market sentiment. 

Stock Watch

UNITYBNK has gained 25% over the last fourteen sessions. The stock currently trades at a price of ?1.10 and has returned 108% YTD (Banking sector: -2% YTD) making it the second best performing stock on the exchange. 

Corporate Disclosures 

The Board of Directors of Consolidated Hallmark Insurance have declared that its closed period for trading in the shares of the company will commence on Wednesday, July 4 2018. They also announced the arrangement of a board meeting on Thursday, July 19, 2018 to consider the company’s financial statements for the period ended June 30, 2018. 

The Board of Directors of Niger Insurance Plc. have announced that its audited financial statements for the period ended 31 December, 2017 , and the unaudited financial statements for the period ended 31 March, 2018 have been filed with the Nigerian Stock Exchange. The statements will be released following the review process. 

The Board of Directors of Honeywell Flour Mills Plc have announced the decision to issue of a final dividend of 6 kobo per 50 kobo ordinary share, subject to appropriate withholding tax and approval. The dividends will be paid on September 21, 2018. The company also announced the holding of their annual general meeting on Thursday, September 20, 2018 at Civic Centre, Victoria Island, Lagos. 

Reporting for EasyKobo on Wednesday, 4 July 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited

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