Yields soar as market adjusts post-PMA 

31 August 2018 : In spite of a N315 billion OMO maturity, Interbank call rate advanced 9bps to 10.67%, even as system liquidity rose to c.N420 billion. 

Meanwhile, trading in the T-bills market turned bearish, in reaction to higher than expected stop rates at Wednesday’s PMA (rates closed 150bps higher on average versus previous levels) across all maturities. Overall, yields advanced 70bps on average across the space. Notably, yields on the 21DTM, 91DTM and 322DTM bills advanced 200bps, 135bps and 175bps to 11.57%, 11.70% and 14.27% respectively. The bond space was similarly bearish, with sell-side activity dominating the space and benchmark yields advancing 27bps on average. Notably, yield on the 15.54% FGN FEB 2020 bond rose 70bps to 14.51%. 

In spite of the relatively healthy system liquidity, analysts anticipate a muted trading session as investors await CBN activity to close the week. Meanwhile, analysts foresee some speculative activity at the short-end of the bond space, as investors anticipate the direction of yields. 

NSE ASI set to end the month in negative territory 

Amidst sizable pressure from the Banking and Industrial Goods sectors, the NSI-ASI continued to trend southwards, shedding 77bps on the day. 

The Industrial Goods sector was the biggest loser, down 230bps as further losses in WAPCO (-706bps) and DANGCEM (-440bps) weighed the sector. The Banking (-177bps) and Oil and Gas (-80bps) sectors also closed in the red as FO (-783bps), OANDO (-278bps), GUARANTY (-269bps) and ZENITHBANK (-159bps) all lost points. Meanwhile, the Consumer Goods sector was the only gainer on the day, rising 20bps thanks to gains in GUINNESS (+556bps). 

Market breadth remained negative with 12 advances and 27 declines. 

Market Outlook 

Driven by the sustained bearish market sentiment, analysts expect the market to remain in negative territory on the last trading day of the month, with August posting the second largest m/m decline so far this year (MTD: -5.2%, May: -7.7%). 

Stock Watch: UBA released its H1’18 results yesterday with the bank recording a 10% y/y rise in gross earnings, while PAT rose by a modest 3% to N44 billion, 2% below analyst's estimate. The stock gained 62bps in the previous session to close at N8.10 (YTD: -21%). 

Corporate Disclosures

The Board of Directors of Royal Exchange Plc has notified shareholders of an Emergency Board Meeting to be held ath the boardroom, Royal Exchange House on 11 September 2018. 

The Board of Direcors of Diamond Bank Plc has notified the Nigerian Stock exchange of a fine of N250 billion, imposed on Diamond Bank by the Central Bank of Nigeria. 

The Board of Directors of Stanbic IBTC Holdings Plc has notified shareholders that its banking subsidiary- Stanbic IBTC Bank PLC has received penalties imposed by the Central Bank of Nigeria. 

The Board of Directors of Law Union & Rock Insurance Plc has notified the Nigerian Stock Exchange of the exit of Mr. Steve Ajudua as the Chief Marketing Officer with effect from 15 September 2018. Mr. Wole Yekinni will act as Chief Marketing Officer Pending the sppointment of a sustantive Chief. 

Reporting for EasyKobo on Friday ,31 August 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited