For the week ended December 27, 2019
The local equities market closed in the red zone amidst sustained sell-offs. Consequently, NSE All-share Index and Market Capitalization declined by 0.41 per cent to close the week at 26,416.48 and N12.70 trillion, respectively. With this, the NSE ASI has returned negative 15.95 per cent year-to-date.
Despite the decline in the ASI, three sub-sector gauges closed in the green zone. NSE Consumer Goods, NSE Insurance and NSE Oil & Gas indices increased by 4.76 per cent, 1.42 per cent and 0.71 per cent to close at 582.11 points, 122.15 points and 234.12 points respectively. however, NSE Banking Index and NSE Industrial indices closed in the red zone as they moderated by 0.26 per cent and 0.31 per cent to close at 354.50 points and 1,048.29 points respectively.
The equities market tanked further due basically to profit taking activities by investors. We still maintain our view that investors should take positions in quality names with a medium to long term investment horizon as prices remain attractive at current levels.
As at close of trade week, Market Capitalisation and NSI closed the trading week with no movement as against preceding Friday, Decemeber 20 2019. The Market Capitailsation and NSI closed the week at N501.14bn and N697.54bn points, respectively.
Rates in the money market dropped by an average of c.750bps supported by c.n900.00bn of OMO maturities flowing into the system. The OBB and OVN rates ended the week at 3.93 per cent and 4.57 per cent, respectively.
In the just concluded week, CBN sold treasury bills worth N250.51bn via Open Market Operation which partly offset the total inflows from the matured T-bills worth N277.80bn.
We expect rates to remain stable at low levels next week, with a buoyant system liquidity and expected OMO maturities of c.n500bn, barring a CBN OMO auction.
The Bond Market ended the holiday-filled week on a bright note, with mixed sentiment seen across the benchmark bond curve. We saw improved offers on the short-end, as some banks sold-off to realize year-end profits. On the contrary, we saw continued demand on the long-end (mostly the 2049s) as local investors looked to reinvest today’s OMO maturity of c.n900.00bn. Consequently, yields expanded by an average of c.5bps across the benchmark bond curve.
We anticipate a more bullish demeanor at the start of next week, with market liquidity expected to support demand.
Treasury bills market
The Treasury Bills market resumed trading after the Christmas break with improved demand noticed across the curve. We saw significant buy-interest in OMO bills, as inflows from OMO maturities (c.n900.00bn) swayed investors’ sentiment into lockingin excess funds rather than having idle funds. Yields dropped by an average of c.18bps across the Benchmark OMO curve. At the OMO auction, CBN sold a total of c.n250.51bn at only the long-end (361- Day), with the stop rate remaining unchanged (13.28 per cent) from last week’s auction. There was NO SALE on the 88-Day and 179-Day tenors. The NTB side witnessed slightly movement, with demand skewed towards the short to- mid- tenor maturities, with the majority of the consummated deals being orderdriven at retail size. Yields compressed up by an average of c.5bps across the NTB curve.
With NTB auction expected next week, we still expect a bullish market especially on OMO bills, with c.n500.00bn of maturing funds expected to flow in the system.
Foreign exchange market
At the Interbank, the Naira/usd and SMIS rate were unchanged to close the week at N307.00/$ and N358.51/$ respectively. At the I&E FX window, the closing rate for the Naira depreciated by 37k to close the day at N364.57/$. At the parallel market segment, the cash rates depreciated by 30k to close at N360.50/$ while the transfer rates appreciated by 50k to close the week at N363.00/$.
In the outgoing week, CBN injected a total of $210.00 m into the foreign exchange market; of which $100.00m was allocated to Wholesale (SMIS), $55.00m was allocated to Small and Medium Scale Enterprises and $55.00m was sold for invisibles.
We expect the naira to remain largely stable across the various windows of the currency space as the CBN maintains interventions in the FX market.
Dr Bernard Ilori E-mail – [email protected] Mobile: 09030004477 (Sms/whatsapp only)