June 22, 2017/InvestmentOne Research

Please click to download the Market Report for Thursday 22^nd June 2017

EQUITIES:  

• The Nigerian bourse closed in the red for the second trading session in a row with the NSE-ASI down by -1.64% following sell-off in tickers across sectors. The index YTD return now stands at +22.53% while market capitalisation closed at c.N11.39bn.
• Sell-off in DANGCEM (-248.07pts), ZENITHBANK (-65.82pts) and ETI (-65.71pts) weighed on the index performance, neutralizing the gains in CONOIL (+8.37pts), ASHAKACEM (+4.76pts) and LINKASSURE (+0.93pts).
  

• Market breadth index (-0.27x) also closed in the negative zone as 14 stocks led by CONOIL (+10.24%)  closed up compared to 46 losers topped by MAYBAKER (-9.62%).
• While volume traded was relatively flat compared to yesterday’s session, value turnover declined by -21% to c.N5.04bn. UBA and DIAMONDBANK were the most actively traded stocks with c.88m and c.70m respectively.
• Major sectoral indices closed in the red; Consumer (-2.36%), Banking (-2.35%), Industrial (-0.76%) and Oil & Gas (-0.42%).
• In the near term, we see downside risk to ASI performance from volatility in Brent oil price given its implication for reserve accretion and exchange rate stability. With that said, we however expect support to market performance from recent reform in the FX market as well as new PFAs guideline which requires increased investment allocation to equities.
  

CURRENCY:

• As CBN sustained its intervention at the close of trading at the interbank market, the NGN continued to close at N305-306 levels against the USD. With this said, the NGN gained +0.73% to N398.70 against the GBP and +0.95% to N351.35 against the EUR.
• At the parallel market, the NGN remained flat at N410 against the EUR, N465 against the GBP but depreciated by -0.54% to N370 against the USD. With this said, the NGN gained +0.80% at the Investors and Exporters’ FX window to close at N363.00 against the USD.
• Going forward, we expect the NGN to continue to see support from the CBN’s FX intervention sales.

FIXED INCOME:

• Following the inflow of the N150bn OMO maturity today, the Open-Buy-Back and Overnight rates fell to 8.50% and 9.08%, from 18.00% and 19.00% yesterday. The decline in rates occurred despite CBN selling c.N23bn worth of bills at 18.00% and 18.60% stop rates.
• As at time of writing, NIBOR rates were yet to be published.
• Investors were largely bullish in the bond market today, which may not be unconnected with the OMO maturities, which improved system liquidity. The downward trend in yields was most noticeable on the July 2021 which fell by 10bps to 16.27%. With this said, the yield on the 5yr and 7yr benchmark bonds were flat at 16.17% and 15.91% respectively, while the yield on the 10yr benchmark bond contracted by 9bps to 16.20%.
• Going forward, we expect CBN to keep system liquidity tight in defence of the local currency. As such we expect money market rates to remain high. We are also likely to see yields in the bond market remain range bound in the absence of offshore demands.

Below are key NSE statistics as at the end of trades: