Equity Market: Investors gravitate towards the Consumer Goods sector

The equities market took a bearish turn after two consecutive weeks of gains. The broad index declined by 0.7percent week-on-week (w/w) to close at 23,871.3 points, bringing the year-to-date (YTD) loss to -11.1percent.

Also, i nvestors l ost N90.7billion, as market capitalisation closed at N12.4trillion. In terms of activity, average volumes and value traded were down 44percent and 49percent, to N1.9billion and 185.9million units, respectively.

Across the sectors that we cover, we observed a positive performance in two out of five. The Consumer goods sector (+2.3percent) stood out, as UNILEVER (+20.9percent) and NESTLE (+4percent) gained.

The Oil and Gas sector (+ 1.6percent) followed, suppor t ed by MOBI L (+ 9.9percent) and TOTAL (+6.8percent). On the other hand, the Industrial goods sector (-2.2percent) closed lower, dragged by DANGCEM (-4.3percent) and BUACEMENT (-0.9percent). This was followed by the Insurance sector (-0.6percent) due to sell offs in AIICO (-5.4percent) and WAPIC (-3percent). Finally, the Banking sector depreciated by -2bps on the back of ACCESS (- 2.3percent) and UBN (-8.6percent).

Elsewhere, investors sentiment was downbeat, as market breadth came in at 0.4x vs 2.1x in the preceding week. AIRTEL FY-2019/20 (Revenue: up 11.2percent to $3.4billion, PAT down 4.2percent to $408million, dividend of 3cents/ share declared), NESTLE Q12020 (Revenue down 0.9percent to N70.3billion, PAT down 12.9percent to N11.2billion), TOTAL FY-2019 (Revenue down 5.1percent to N292.2billion,

PAT down 71.4percent to N2.3billion, dividend of N6.7/ share declared), TOTAL Q12020 (Revenue down 9.3percent to N70.2billion and a Loss after Tax of N163million), and finally, LAFARGE Q1-2020 (Revenue up 9.8percent to N63.7billion and PAT from continuing operations up 28percent to N8.1billion), all filed their quarterly earnings reports with the NSE during the week.

This week, we expect the equities market to remain tepid as the global and macroeconomic environment remain lukewarm. However, we expect market players to react to more Q1-2020 earnings released.

Money Market: Auction rates for 91 & 182-Day Bills increase

In the previous week, overall system liquidity was buoyant, evident by the significant decline in average interbank funding rates open buy back (OBB) and overnight (OVN) to 3.1percent from 7.9percent in the preceding week. Notably, inflows during the week were in form of OMO maturities ( N209billion) and Tbills maturities (N33.8billion), while only Tbills sales (N142.8billion) was outflowed.

At the Nigerian Treasury Bills (NTB) primary market, stop rates for the 91-day (2.50percent versus 1.85percent previously) and 182- day ( 2.85percent versus 2.50percent previously) increased significant l y , while the 364-day remained unchanged at 3.84percent. Similar to previous auctions, demand remained strong, with N165.6billion subscription, vs N33.8billion offered. Accordingly, N142.8billion was allotted, in line with the DMO’S revised strategy to increase domestic borrowing by taking advantage of the depressed market rate. Also, the CBN was in the market for OMO, to sale

N70billion worth of bills. While demand was strong across all tenors, with total subscription at N344.2billion, no sale was made.

At the secondary market for Tbills, excess funds from the unmet demand at the auction filtered in, causing average yield to decline by 38 basis points (bps) to 2.28percent. Similarly, given the failure of the OMO auction and a large amount of foreign portfolio investors with idle funds - waiting on dollar supply from the CBN – the performance of secondary market for OMO bills was bullish. Notably, average OMO yield fell by a whopping 163bps to 8.45percent.

This week, we expect system liquidity to tighten slightly, as no OMO maturity is scheduled to hit the system, with only N8.5billion expected from Bond coupon payments. Our position of tighter liquidity is also buttressed by the bond auction taking place, as well as at least one OMO auction to be floated by the CBN, to mop up liquidity.

Bond Market: Average Eurobond yield falls 43bps

In the previous week, sentiments at the local secondary bond market were largely bearish, as investors were taking profit and raising liquidity in anticipation of the primary auction scheduled next week. On a w/w basis, average FGN bond yield increased by 33bps, to end the week at 10.55percent.

At the secondary Eurobond market, the sustained recovery in global crude oil prices fuelled demand for Nigeria’s sovereign Eurobonds. As a result, average yield on sovereign Eurobonds fell by 43bps w/w, to 9.97percent. The positivity also flowed into the corporate Eurobond segment, with average yield declining by 66bps w/w, to settle at 13.04percent.

This week, we expect the Eurobond market to continue to track the performance of the crude oil market. Also, following the approval to increase local borrowing, the DMO released the revised Q2 2020 FGN bond issuance calendar. Notably, for June-2020, the government is set to increase amount on offer from N60billion to N165billion. For this week, the May-2020 bond auction is set to take place, with a total of N60billion across 5yrs, 15yrs and 30yrs tenor.