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The Market Today - 04 September 2018

Q2’18 pension data shows drop in equity holdings                                                         

The National Bureau of Statistics released the report on pension funds industry portfolio for Q2’18, giving us a first look at Pension Fund Administrator (PFA) portfolio holdings – post the implementation of the multi-fund structure in July. Despite the new guidelines nudging PFAs to ramp up their equity holdings, Q2 data shows a decline in equity portion of AUM from 9.25% in Q1 to 8.62% in Q2. We note that this drop may reflect an equity market slump in the quarter (NSE ASI down 8% q/q), general bearish sentiment towards equity investments in a pre-election year, as well as a possible switch to higher yields in the fixed income market. Whilst we still expect PFAs to ramp up their equity holdings as the new multi-fund structure takes hold, we do not expect much traction on this in the near term.                                                 

Market closes flat on first day of September                                                     

"Sizable movements in large cap stocks cancelled each other out to draw the market to a flat close – the ASI lost 3bps. Trading was relatively mixed yesterday, and market breadth narrowed slightly, and we anticipate another see-saw pattern in today’s session.                                                          

Stock Watch: DIAMONDBNK has shed 17% of its market value in the last three sessions and has been trending downwards for the past three months, shedding 45% since the end of May. The stock is trading 23% below its year-high of ₦3.57 achieved in Mid-January.                                                 

Healthy liquidity spurs T-bills buying                                                    

Amid buoyant system liquidity of ₦422 billion, the interbank call rate fell 625bps to 4.42%. With the CBN refraining from an OMO auction, the T-bills market was bullish as yields declined 44bps on average, with buying observed across the space. Notably, the 24DTM and 87DTM bills declined 305bps and 307bps to setlle at 9.52% and 10.41% respectively. Meanwhile, the bond space remained bearish with sell offs observed on the longer-dated instruments as yields on benchmark bonds rose 6bps on average. The largest yield advances were observed on the 12.15% FGN JULY 2034 (26bps to 15.43%) and 12.40% FGN MAR 2036 (22bps to 15.24%) bonds. We expect healthy market liquidity to continue to support demand for T-bills, barring an intervention from the apex bank today. Meanwhile, we foresee further tepid trading in the bond market as investors remain uninterested in the space.