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The Market Today - 10 August 2018

Political uncertainty overshadowing earnings season                                                   

The NSE ASI fell to a 9-month low yesterday (36,232.7 points) amid increasing political volatility ahead of the 2019 elections. We highlight that recent events, including notable defections from the ruling APC party and the sacking of the Director General of the DSS have raised the level of political uncertainty and hit market activity—market turnover declined to a 16-month low of ₦730 million on Wednesday. Despite two of the nation’s biggest lenders releasing strong half year results, the Nigerian bourse has not responded positively with the political developments holding sway on the stock market. With only a handful of companies left to release results, we do not anticipate much joy for the market until the political terrain settles.                                                       

Declines persist as market records fifth-straight red close                                                          

"The bourse remained in negative territory for the fifth consecutive session as sustained subdued trading drove the market 19bps down. Performances across the key sectors were mixed, but negative closes in Banking and Oil and Gas ultimately dragged the market. With negative sentiment prevalent in the market – evidenced by the negative market breadth and weak value traded, we foresee a bearish close to the week, despite the possibility of bargain hunting on beaten down stocks.                                     

Stock Watch: NIGERINS has gained 50% in the last 7 session to trade at a price of ₦0.39 per share. The stock has declined 22% ytd, down from its year-high value of ₦0.50.                                                          

Liquidity mop-up spurs increased market activity                                                           

"The Interbank Call rate advanced 25bps to 8.00% amidst an OMO auction at which the CBN offered ₦450 billion and sold ₦377 billion across the 91DTM and 203DTM bills at respective stop rates of 11.05% and 12.15% (effective yields: 11.36% and 13.03%). Yield movement in the T-bills market reversed in yesterday’s session as expected, with yields rising 12bps on average. Specifically, yields on the 35DTM (+76bps to 11.47%) and 343DTM (+25bps to 12.63%) bills advanced. Meanwhile, sentiment in the bond space was mixed yet again, even as yields on benchmark bonds added 3bps on average. Notably, yields on the 16.00% FGN JUN 2019 and 14.50% FGN JUL 2021 bonds rose 18bps and 20bps to settle at 12.79% and 13.87% respectively. With system liquidity tightened post the liquidity mop-up, we expect the T-bills space to close the week on a negative note. However, we foresee another mixed to flat session on Bonds today in the absence of any significant market drivers.