Bills and Equity- what happened last week ?   

Quarter gets off to bad start with all red closes 

08 October 2018 : The fourth quarter got off to a bearish start as the market shed 12bps on Friday to close out the week 117bps down. Trading was mostly negative today despite an even split between gaining and losing sectors. The Banking sector (w/w: -65bps) capped off the week with a 147bps loss on the day no thanks to losses in heavyweights, ZENITHBANK (d/d: -379bps; w/w +23bps), GUARANTY (d/d:-95bps; w/w:-41bps), and UBA (d/d:-61bps; w/w -238bps). The Industrial Goods (w/w: -35bps) sector finished with a flat close, but lost for the week as DANGCEM (w/w: -244bps) and CCNN (w/w:-119bps) sustained losses during the week. Meanwhile, a sharp upturn in the Consumer Goods sector at week close (d/d: 110bps) was unable to offset earlier losses in the week with the sector closing -32bps lower w/w driven by NB (d/d: +370bps; w/w:-197bps) and GUINNESS (d/d:+122bps; w/w: -125bps). The Oil and Gas sector (d/d:+30bps ; w/w: +113bps) was the sole gainer w/w thanks to strong showings from FO (w/w: +10.22%) and OANDO (d/d: +196bps; w/w: +400bps). 

With market activity moderating w/w and investor sentiment remaining tepid, analysts anticipate a negative start to next week, as the quarter maintains a bearish course. 

Stock Watch: After gaining 10% this week, FO closed atN22.10 on Friday, its highest price since August. Having lost 49% YTD, the stock is trading below its Consensus target price ofN41.69 and is underperforming the Oil and Gas sector (-12% YTD). 

High primary market sales volumes dampen T-bills space 

Due to low liquidity levels following yesterday’s large OMO sale ofN553 billion (?400 billion offered), the interbank call rate advanced 919bps to close at 20.86%. 

Trading persisted bearish in the T-bills space at week close as yields advanced 16bps on average (+2bps w/w). The highest yield advances were observed on the short-dated bills, as yields on the 20DTM and 55DTM bills advanced 56bps and 41bps respectively to settle at 13.06% and 13.18%. On the other hand, the bond space was more positive with benchmark yields declining 6bps d/d (w/w: -10bps) amid healthy demand across the space. Notably, yields on the 16. 39% FGN JAN 2022 and 12.40% FGN MAR 2036 bonds moderated 20bps and 10bps to settle at 14.47% and 15.17% respectively. 

Following the aggressive liquidity mop up observed in the last few trading sessions, analysts expect the tight system liquidity to cap demand across the fixed income market at week open. 

The CBN continued its intervention in the Foreign Exchange market, injecting $210 million into the various FX windows on Wednesday. Amid this, the naira appreciatedN0.10 w/w at the I&E FX Window to settle atN363.82 against the dollar while remaining flat atN359.50 in the parallel market. 

Analysts expect the Naira to remain stable across the various windows of the currency space as the CBN continues to intervene in the FX market. 

Reporting for EasyKobo on Monday , 08 October 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited

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