August 24, 2018
By InvestAdvocate
Lagos (INVESTADVOCATE)-The bulls on Friday resurfaced on the Nigerian bourse after the Eid El Kabir holiday, as the all-share index (ASI) closed higher by 0.45 percent week-on-week (w/w) to 35,426.21 points – halting three consecutive weeks of losses and posting the highest weekly gain in 8 weeks.
Cordros reports that following this trend, the Month-to-Date and Year-to-Date losses moderated to 4.30 percent and 7.94 percent respectively.
The report says investor interest in the shares of Nigeria’s most capitalised listed company, Dangote Cement Plc contributed the most to gains recorded in the two (out of three) positive sessions of the week.
According to Cordros, the Industrial Goods and Insurance indices closed positive, while the Banking, Consumer Goods, and Oil & Gas indices posted negative returns. Meanwhile, market breadth remained negative, with 44 losers and 13 gainers.
“Our outlook for equities in the near to medium term remain conservative, in the absence of a near term one-off positive catalyst; and more so, amidst brewing political concerns. However, stable macroeconomic fundamentals remain supportive of recovery in the long term,” the Cordros update affirmed.
On the global stage, Cordros reports that most global market indices within its coverage closed the week positive, at the time of writing. The report says gains resurfaced in Asia (CSI 300: +2.96 percent; Nikkei 225: +1.49 percent) and the Euro area (Euro Stoxx 50: +1.68 percent; FTSE 100: +0.25 percent), while sentiments were mixed in the US, with the Dow posting a loss of 0.05 percent, and the S&P 500 inching up 0.24 percent.
“Major contributing factors include political issues, optimism over US-China trade talks, earnings releases, and economic data. The emerging (MSCI EM: +2.47 percent) and frontier (MSCI FM: +0.47 percent) markets also closed the week positive, owing to gains recorded in China and India (+0.80 percent), as well as in Nigeria (+0.45 percent) respectively,” the Cordros report added.
On the treasury bills, the report says on the domestic scene, activities in the that market were bullish, as still-healthy system liquidity supported demand. Yields shed 5 bps on average, w/w, to close at 12.15 percent.
According to Cordros, investor sentiment was positive at the mid (-11 basis points) segment, while selloff ensued at the short (+4 bps), and long (+15 bps) ends of the curve, amid demand for 97DTM (-45 bps) bill and sell pressure in the 20DTM (+97 bps) and 223DTM (+20 bps) bills, respectively.
“Yields are expected to drop in the meantime, supported by expected buoyant system liquidity. At the NTB auction scheduled for next week, the CBN will offer NGN206.95 billion – NGN24.96 billion of the 91-day, NGN44.99 billion of the 182-day, and NGN137.00 billion of the 364-day – worth of bills to the market,” the report added.
Cordros reports that conversely, trading in the bond market was bearish, as average yield inched up 1 bps w/w, to close at 14.55 percent. Yield expansion at the long (+23 bps) end of the curve, outweighed contractions at the short (-10 bps) and mid (-3 bps) segments, following selloff of the APR-2037 (+73 bps) bond, and demand for the JUL-2021 (-25 bps) and FEB-2028 (-8 bps) bonds respectively.
“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 report said.
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