FREE

The Market Today - 03 January 2019

NSE reviews composition of market indices

At the turn of the year, the Nigerian Stock Exchange completed a semi-annual review of the composition of the NSE 30 and eight sectoral indices of the Exchange. The exercise is meant to reflect the changes in status or the compliance with certain criteria of these stocks. In the NSE 30 Index, BETAGLAS was removed from the index and replaced by STERLNBANK. Meanwhile, the Banking Index saw the removal of DIAMONDBNK, likely due to the impending merger with ACCESS which would lead to the delisting of the stock by some time in H2’19; the stock has been replaced by JAIZBANK. The Oil & Gas index was also reshuffled slightly, with ETERNA removed and replaced by MRSOIL, while the Industrial and Consumer Goods indices remained unchanged. We anticipate heightened trading activity on the new stocks included on the various indices as portfolio managers and traders adjust their portfolios.            

2019 off to a slow start as market closes red                                           

Activity levels were significantly lower (₦1.6 billion) than 30-day average on the first trading day of the year, with the NSE closing 115bps lower, spurred by sell-offs in three of the four key sectors. Market breadth turned negative with 18 advances and 26 declines. With weak investor sentiment weighing down market activity and the prospect of further pressure on the market in the run up to the elections in February, we anticipate another tepid session today with a negative tilt.                                            

Stock Watch: Following its semi-annual NSE index rebalancing exercise, BETAGLASS has been removed from the NSE30 Index, to be replaced with STERLNBANK, while the Banking index will no longer include DIAMONDBNK – JAIZBANK will take its place. Finally, ETERNA has been removed from the Oil & Gas index, and MRSOIL has taken the stock’s place. We expect heightened activity on these stocks over the next couple of sessions as fund managers rebalance their portfolios accordingly.                                           

PMA activities resume, treasury bills turn bullish                                     

The CBN conducted its first PMA in 5 weeks at the start of 2019, offering and selling c.₦75 billion (c.₦116billion matured) on the 91DTM, 182DTM and 364DTM bills at stop rates of 10.899%, 13.100% and 14.500% respectively (effective yields: 11.20%, 14.02% and 16.95%). Following the net maturity, the Interbank Call rate declined 67bps to settle at 18.33%. We anticipate a mixed trading session in the T-bills market today as we foresee the CBN conducting another OMO auction to keep watch over liquidity. Meanwhile, we expect further negative sentiment in the bond space as investor sentiment remains weak.