The Market Today - 13 September 2018

Nigerian Equity Market – No sign of respite                                               

With uncertainty surrounding the upcoming elections and other external developments that have seemingly increased the allure of foreign assets, the Nigerian equity market has been on a southward trajectory for the most of 2018. Whilst the market pull-back began since the end of January, losses on the exchange appear to have intensified in recent time, with August recording the second largest m/m loss so far this year at 5.9% and month-to-date losses in September already topping this figure at 7.3%. Recent developments surrounding regulatory fines and penalties appear to have worsened investor sentiment. Though other African markets appear to have also suffered from weak investor sentiment (Kenya: -6.6% and South Africa: -6.0%), Nigeria has recorded the most sizeable sell-offs with year-to-date losses at 15.6% as blue-chip stocks such as NB (-38% ytd), ZENITHBANK (-23% ytd), GUARANTY (-20% ytd) have dropped to recent lows. We expect investor apathy for Nigerian securities to keep the downward pressure on stock prices for the rest of 2018.                                              

Nigerian bourse records heaviest daily loss in 2018                                             

"The Nigerian equity market recorded its largest d/d loss so far this year in yesterday’s session, after wide-spread sell-offs across the three largest sectors dragged the All-Share Index 346bps lower – its lowest level in 15 months. With deteriorating negative sentiment continuing to drive the ASI down, we expect further losses in the market. We do not expect bargain hunting to provide sufficient support for the market given the wide-spread rout.                                   

Stock Watch: Amid the broader market decline, FBNH has lost 16% in the last 11 sessions. The stock wiped out all gains recorded so far this year after shedding 8% yesterday to reach a year-low of ₦8.10, representing a 40% discount from our target price of ₦13.53.                                          

CBN hikes one year T-bill rate at PMA                                            

The CBN conducted a Primary Market Auction yesterday, offering and selling ₦136 billion across the 91DTM, 182DTM and 364DTM bills at stop rates of 11.00%, 12.30% and 13.50% respectively (effective yields: 11.31%, 13.10% and 15.60%). Notably, rates were unchanged from the previous PMA, save for the 364DTM bill, which went up by 45bps. Amid this, the Interbank call rate advanced 200bps to 6.33%.  Meanwhile, bearish sentiment persisted across the secondary market, with average yields on T-bills advancing 23bps yesterday. Notably, selling was more prevalent on the shorter-dated bills, with yields on the 50DTM and 85DTM bills advancing 78bps and 85bps to settle at 13.79% and 13.90% respectively. Trading was similarly bearish in the bond market, with yields on benchmark bonds advancing 8bps on average. Particularly, the yield on the 14.50% FGN JUL 2021 bond advanced 32bps to settle at 15.36%.