August 3, 2018
By Yakubu LAAH InvestAdvocate
Lagos (INVESTADVOCATE)-Proceedings in the equities market turned bearish, as the all-share index (ASI) shed 0.37 percent week-on-week (w/w) to close at 36,499.67points, with investors booking profit on previous gains.
Cordros reports that three of the five sessions week closed in the red, as the Month-to-Date and Year-to-Date losses rose to 1.40 percent and 4.56 percent, respectively.
The report says total volume of trades dropped 1.82 percent to 1.39 billion units, valued at N20.32 billion (+21.37 percent).
“Most sectoral indices closed lower – Consumer Goods (-1.01 percent), Insurance (-0.53 percent), and Industrial Goods (-0.53 percent) — save for the Banking (+0.83 percent) and Oil & Gas (+6.76 percent) indices,” Cordros added.
According to the report, market breadth was negative with 42 losers and 34 gainers, respectively led by beer producer, International Breweries Plc emerged the worst loser with a loss of -17.57 percent, while Union Diagnostic & Clinical Services Plc with a gain of +50 percent was adjudged the topmost gainer.
“In our view, selloffs are likely to persist in the short to medium term, in the absence of a positive one-off catalyst. However, likelihood of recovery in the long term remains supported by stable macroeconomic fundamentals,” the Cordros report affirmed.
The report says activities in the treasury bills market were bullish, as sentiments were driven by the healthy system liquidity. As a result, average yield moderated by 10 bps to 11.80 percent. Investor sentiment was positive across the short (-24 bps) and long (-1 bp) ends of the curve, amid demand for 41DTM (-78 bps) and 349DTM (-17 bps) bills, respectively.
Conversely, a selloff of the 167DTM (+35 bps) bill led to yield expansion at the mid (+35 bps) segment. Meanwhile, at this week’s NTB auction, the CBN fully allotted N215.63 billion worth of bills – N9.54 billion of the 91-day, N69.66 billion of the 182-day and N136.52 billion of the 364-day – at respective stop rates of 10 percent (previously 10 percent), 10.4 percent (previously 10.5 percent), and 11.30 percent (previously 11.49 percent).
“Yields are expected to be pressured, due to anticipated squeeze in liquidity position next week,” Cordros said.
The report says trading in the bond market was also bullish, driven by buoyant liquidity, as average yield shed 5 bps, w/w, to 13.86 percent. Demand for the FEB-2020 (-42 bps) and MAR-2036 (-10 bps) bonds led to yield contraction at the short (+9 bps) and long (-6 bps) ends of the curve, respectively. Yields at the mid segment were flat.
“We reiterate our expectation for modestly higher yields in the medium term, anchored on (1) domestic monetary policy direction, (2) capital flight amid higher yields in safe haven assets, (3) political uncertainty stemming from the upcoming general elections, and (4) government borrowing to fund the 2018 budget,” the Cordros report affirmed.
On the global stage, sentiments turned negative across most markets with Asia (CSI 300: -5.85 percent, Nikkei 225: -0.83 percent) posting the largest loss.
Cordros reports that investors in the Euro area (FSE 100: -0.57 percent, Euro Stoxx 50: -1.27 percent) were also bearish, while returns were mixed in the U.S (DJIA; -0.28 percent, S&P 500: +0.56 percent).
“Major contributing factors include corporate earnings, lingering trade war fears, monetary policy decision, and economic data,” the report affirmed.
According to Cordros, the bears also resurfaced in the emerging (MSCI EM: -2.28 percent) market, as significant selloffs in China, offset the gains in India (+0.59 percent) and Brazil (+2.36 percent). Frontier markets also closed negative, as shown in the MSCI FM (-0.85 percent) index, following losses in Nigeria (-0.37 percent), Kenya (-0.75 percent), and Morocco (-0.04 percent).
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