July 3, 2017/InvestmentOne Research

Please click to download the Market Report for Tuesday 4^th July 2017

 EQUITIES:

• The Nigerian bourse closed in the red for  the third consecutive trading sessions as the All Share Index declined by -1.10% to berth at 32,410.20pts. This corresponds to a market capitalisation of c.N11.17trillion while the index YTD return stands at 20.60%.
• This performance reflected sell-off in Banking (-2.26%), Oil & Gas (-1.05%) as well as Consumer (-1.16%) trackers. Specifically, decline in NB (-69.26pts), GUARANTY (-37.70pts) and UBA (-52.80pts) could be largely blamed for today’s decline in the index offsetting the gain in HONYFLOUR (+4.38pts) and SKYEBANK (+1.21pts).
• However, volume and value of trades strengthened by +27% and +12% respectively as investors exchanged over 206m units of stocks worth c.N1.70bn in 4,294 deals. FIDELITY and DIAMONDBANK were the most actively traded stocks with c.33m and c.24m units of stocks.
• In today’s session, there were 10 gainers led by REDSTAREX (+10.14%) as against 31 losers topped by NEMEITH (-8.54%). Hence, market breadth index (-0.17x) closed in the negative zone.
• With the exception of the Industrial tracker which recorded a marginal +0.01% gain, other major sectoral indexes closed in the red.
• We see the current downtrend in the index as presenting attractive entry point for investors given our expectation of likelihood of positive Q2 2017 earnings scorecards.
  

CURRENCY:

• CBN sustained its intervention at the close of trading at the interbank market today as the local currency closed flat at N305.95 against the USD. With this said, the Naira gained +0.22% to N406.76 against the GBP and +0.35% to N356.83 against the EUR.
• At the parallel market, the local currency remained relatively flat at N366 against the USD and N410 against the EUR while its depreciated by -1.06% to N470 against the GBP. At the I&E FX window, the NGN lost -1.19% to close at N363.33 against the USD.

§  Going forward, we expect the local currency to continue to see support from the CBN’s intervention sales, with the Apex bank offering $100m in forwards to the market yesterday.

FIXED INCOME:

• CBN maintained its stance in squeezing system liquidity in defence of the local currency today, selling close to N30bn worth of OMO bills at 17.90% and 18.55% stop rates.
• The squeeze in system liquidity as a result may have contributed to the rise in the Overnight and Open-Buy-Back rates to 50.92% and 44.17%, from 15.67% and 14.84% respectively. Furthermore, the 3month NIBOR rate inched up 5bps while the 1mont and 6month NIBOR rates were flat at 19.76% and 23.62% respectively.
• Yield movement in the bond market was mixed today, as yields on short dated bonds declined while there was an increase in yields on bonds at the mid to long end of the curve. Yield on the June 2019 fell by 9bps to 16.47% while the yield on the 5yr and 10yr benchmark bonds increased by 2bps and 7bps to 16.10% and 16.12% respectively. The yield on the 7yr benchmark bond was flat at 15.88%. 
• Going forward, N65bn worth of OMO bills will be maturing on Thursday, however we expect CBN to keep system liquidity tight in defence of the local currency. As such we expect money market rates to remain high and yields in the fixed income space to remain at current levels in the absence of offshore demands.
  

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