NSE-ASI records largest weekon-week gain in 2019, up 7%

The local bourse drew the curtain for the trading week to May 24 on a bullish note, as the market recorded gains in all the week’s trading sessions save for Friday.

MTNN and DANGCEM were the major stocks that drove the cheery performance as both stocks recorded massive gains throughout the week save for the last trading day.

Overall, the All Share Index rose by 7percent week-on-week (w/w) to close the week at 30,881.3 points, spurring YTD return to +0.1percent. Market capitalization for the week surged N885billion to finish at N13.6trillion.

Similarly, activity level was overwhelming as average value and volume of stocks traded for the week surged 189percent and 589percent to end at N10.3billion and 1.6million units respectively.

Sector performance for the week was mixed as 3 of the sectors under our watch closed

in the negative region. The telecommunication sector led gainers for the week buoyed by increasing demand for MTNN (+28.5percent).

In the same vein, The Industrial (+6.1percent) and Insurance (+ 1.2percent) sectors also gained, largely driven by price appreciation in DANGCEM (+13.6percent) and AIICO (+6.2percent).

On the flip side, the Consumer Goods (-3percent), Banking (-1.8percent) and Oil & Gas (-0.7percent) trended southwards w/w owing to price declines in NESTLE (-2.1percent), NB (-7.2percent), ACCESS (- 7.4percent ) , ZENITH (- 3.1percent ) , OANDO (-8.3percent) and FO (-1.9percent).

Investors sentiments for the week as gauged by market breadth was underwhelming, closing at 0.9x as 29 stocks advanced over the week against 33 decliners. Given the recent bullish run in the market we expect some profit taking decision to clog trading sentiments this week.

However, we do not rule out the possibility of intermittent gain in the market as investors hunt for attractively priced stocks on the exchange.

Money Market: CBN renew liquidity tightening

System liquidity conditions deteriorated through the prior week as overall outflows outweighed inflows. The major outflows for the week were in the form of weekly wholesale FX sales on Monday ($210.0mn), May-19 primary market Bond sales (N111.3bn) on Wednesday, new OMO issuance on Thursday (N360.7bn) and the bi-monthly retail FX sales on Friday.

The key inflows were from OMO maturity (N106.9bn) and retail FX refunds to Bank, on Thursday. Additionally, after the repayment of its series 4 paper, Dangote Cement Plc opened for subscription series 5, 6, and 7 commercial paper as it planned to raise c. N50billion to support its short- term funding requirements.

In all, average interbank funding rates ( Open Buy Back and Overnight rates) tracked the direction of system liquidity, up from 4.9percent to a high of 11.6percent at the close of the week.

Meanwhile, interbank activities at CBN’S SLF/SDF window widened compared to the prior week as players continued to deposit excess fund with the CBN, especially before the new OMO sale on Thursday.

Further analysis showed that demand at the OMO auction conducted during the week was positive as total bids worth 2.5x the total initial offered amount of N150billion, turned up - skewed largely to medium and long-dated bills with a bid-cover ratio of 2.0x and 3.0x respectively.

Thus, average stop rates at the auction cleared significantly lower when compared to previous levels though still more attractive than NTB’S [91-day (11.40percent versus 11.72percent at the last auction), 182-day (11.68percent versus 12.77percent at the last auction) and 364-day (12.50percent versus 12.82percent at the last auction).

In the secondary Nigerian Treasury Bills (NTB) market, market bears surfaced during in the later part of the week on the back of an OMO issuance on Thursday (the first in 9 sessions), offsetting the bullish interest that dominated the early part of the week which drove yields below 12percent levels. Accordingly, average yields added 1basis point (bp) w/w to close at 12.1percent.

Bond OMO and NTB maturities of above N100billion are scheduled to hit the system. Additionally, while commercial papers from both Mixta Real Estate Plc (N9.8billion) and Flour Mills of Nigeria Plc (N8billion) matured in the prior week, both have announced intentions to raise additional N3billion and N12billion CPS via their respective existing programs. Accordingly, we expect the CBN to maintain its liquidity tightening stance this week.

Bond Market : Rates moderate significantly at the local primary market auction

In the Bonds space, the Debt Management Office (DMO) successfully conducted its May-19 bond auction during the week, offering N100billion – shared between re-opened 5- year ( N35.0bn), 10- year ( N35billion), and 30- year (N30billion) notes.

The DMO allotted 1.1x the initially offered amount via competitive bids as total demand at the auction was largely positive, with the bidto-cover ratio at 2.7x (higher than the last Apr-19 auction of 1.5x).

However, most of the demand was for the 10-year and 30-year notes (Bid to cover ratio: 10-year; 3.5x and 30-year; 3.4x) while demand for the 5-year note was also positive at 1.3x the offered amount.

FMDQ OTC Monthly, a report by the market development group of the OTC Securities Exchange shows that turnover in the Fixed Income and Currency (FIC) markets for the month ended April 30, 2019 was N16.37trillion.

This record FIC turnover in April 2019 represents a 43.51percent or N12.61trillion month- on- month ( MOM) decrease on the turnover recorded in March 2019 ( N28.98trillion) and a 9.57percent year- on- year (YOY) increase.

Total FX market turnover in April 2019 was $17.43billion (N6.28trillion), representing a 47.59percent ($15.83billion) MOM decrease from the turnover recorded in March 2019 ($33.26billion).

Analysis of FX turnover by trade type indicates a MOM decrease by 34.36percent, 44.10percent and 59.01percent in FX turnover for InterMember, Member- Clients and Member- CBN trades

respectively.

This is attributable to the normalisation in Foreign Portfolio Investment (FPI) inflows following the postelections surge recorded in March 2019.

Turnover at the Investors & Exporters (I&E) FX Window in April 2019 recorded a 29.01percent ($2.17billion) MOM decrease to close at $ 5.31billion from the $ 7.48billion recorded in March 2019, whilst recording a YOY increase of 12.03percent ($ 0.57billion) from the turnover of $ 4.74billion recorded in April 2018.

Analysis of FX turnover by product type showed a MOM decrease in both FX Spot and FX Derivatives by 50.33percent ($10.80billion) and 42.60percent ($5.02billion) respectively, with the MOM decrease in FX Spot accounting for 68.25percent of the total MOM decrease in FX turnover.

The MOM decrease in FX Derivatives was driven mainly by decreases in FX Swaps and Futures turnover, jointly accounting for 71.51percent of the MOM decrease. In April 2019, the 34th Nairasettled OTC FX Futures Contract ( NGUS APR 24 2019) with total open contracts size of $ 431.16million matured and was settled, bringing the total value of OTC FX Futures contracts settled on FMDQ since inception to c $ 15.28billion; out of FX Futures contracts worth $23.23billion traded to date.

A new 12-month contract (NGUS APR 29 2020) with a notional principal of $ 1bn and futures price of $/N362.41 was introduced. In April 2019, the Naira appreciated against the US Dollar at the I&E FX Window by N0.05 to close the month at $/N360.63 while the parallel market and the CBN Official Spot rates remained unchanged at $/N360 and $/ N306.95 respectively

Despite the appreciation of the naira in the I & E FX Window, there was a decline in FX inflows from Foreign Direct Investment (FDI) and FPI inflows as market activities normalised following the postelection euphoria experienced in March.