ASI ends November 490bps lower m/m 

03 December 2018 : Trading in the equity market ended on a positive note this week, with the ASI recording an 86bps d/d gain supported by a rebound across all key sector. This was however unable to offset much weightier earlier losses, with the index losing 254bps w/w. The Banking sector and Oil & Gas sector gained 153bps (-299bps w/w) and 152bps (-512bps) on the day following upticks in UBA (+638bps d/d), ETI (+290bps d/d), MOBIL (+938bps d/d) and OANDO (+217bps d/d). Meanwhile, the Consumer Goods sector extended gains, advancing 90bps d/d (w/w: +8bps) driven by NB (+403bps d/d) and UNILEVER (+101bps d/d). Finally, the Industrial Goods sector managed a 14bps gain (-336bps w/w), thanks to an uptick in DANGCEM (+103bps d/d). 

While a much anticipated strengthening in bargain hunting supported a green close on the bourse today, analysts foresee a more mixed trading pattern at week open amid an interplay of underlying weak market sentiment and cautious cherry picking across beaten-down names. 

Stock Watch: FO advanced 405bps following three consecutive sessions of gains, closing at N18.00. Despite this, the stock is trading 59% below its year-open price, underperforming the Oil & Gas sector (-16.53%). 

Primary market activities heightened this week 

The CBN conducted four auctions this week, selling c.N660 billion in three OMOs and c.N150 billion in a PMA this week, even as N444 billion of OMO maturities hit the system on Thursday. Whilst the stop rates on each maturity increased at successive auctions, analysts especially note that the 1-year bill increased by 25bps at each auction to close at 15.00% in today’s iteration. Amidst this, system liquidity tightened, driving a 10.73% w/w rise in the Interbank Call rate to 16.57% on Friday. 

Meanwhile, trading was mostly negative in the T-bills space this week, with yields advancing 45bps w/w (+15bps d/d). Specifically, yields on the 27DTM and 342DTM bills advanced 98bps w/w and 58bps w/w to settle at 13.41% and 17.36% respectively. This was expected given the significantly higher stop rates at the OMO auction today. Likewise, trading in the bond space was bearish, with yields on benchmark bonds advancing 8bps w/w (+8bps d/d). Notably, yields on the 16.29% FGN MAR 2027 and 10.00% FGN JUL 2030 bonds advanced 18bps and 19bps to settle at 15.84% and 15.78% respectively. 

The Debt Management Office plans to fully redeem all maturing treasury bills in December (N78.05 billion) and partially redeem (by N84.5 billion) bills maturing on January 3 2019. Whilst this development would normally portend an improvement in demand, analysts are less optimistic about this, and rather believe that market participants would monitor the actions of the CBN in coming sessions, looking for signs of increased OMO activity in the absence of PMAs. 

The CBN injected $210 million at the Interbank Foreign Exchange on Wednesday. The Naira appreciated N0.60 w/w at the I&E FX Window to settle at N364.10 against the dollar and depreciated N5.00 settle at N367.50 w/w 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 , 03 December 2018 in Lagos, Nigeria

Source: Vetiva Capital Management Limited