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The Market Today - 06 February 2019

Primary market activity off to strong start in Q1’19

The NSE has seen a flurry of primary market activity in the first few weeks of 2019, with one of the latest being Consolidated Hallmark Insurance Plc (HMARKINS) listing an additional 1.1 billion shares on the exchange yesterday. In addition to this, Lafarge Africa Plc (WAPCO) recently concluded its ₦90 billion rights issue, their second capital raise in over a year, while the IPO for Skyway Aviation Handling Company (SAHCO) was concluded in early January, with 406 million shares set to be added to the NSE. The total value raised from rights issues declined from ₦340 billion in 2017 to ₦40 billion in 2018 as investor sentiment remained weak throughout the year-post January. With the conclusion of elections and the expectation of a slight post-election boost, coupled with expected renewed foreign interest in the market, we foresee an uptick in primary market activity in 2019. Notably, we expect a small group of listings driven by the Bureau of Public Enterprises, including Indorama Eleme Petrochemicals and Nicon Insurance. More so, driven by regulation, the Insurance sector could see higher capital raising activity, and we also highlight the possibility of a continuation in the proposed listing of MTN Nigeria which would be a significant boost to the NSE’s market cap.

Market inches up 9bps amidst mild gains in three sectors                                       

The Nigerian Bourse inched up 9bps yesterday, with the Oil & Gas sector taking the lead. Meanwhile, significant interest in select banking names drove market turnover higher than the previous session.          Market breadth turned positive with 19 advances and 13 declines. With market sentiment remaining downbeat despite yesterday’s positive close, we expect trading today to continue mixed with a positive bias driven by bargain buying on select stocks.

Stock Watch: ACCESS has gained 10% in the past three sessions, to settle at ₦6.30. However, the stock has lost 7.35% in 2019, underperforming the Banking sector (-0.2% ytd).

Bond yields advance as buy interest wanes                                        

The CBN sold c.₦124 billion on Tuesday (₦80 billion offered) at an OMO auction, across the 93DTM, 191DTM and 359DTM bills at stop rates of 11.00%, 13.50% and 15.00% respectively (effective yields: 11.32%, 14.53% and 17.60%). Meanwhile, the Interbank Call rate advanced 267bps to settle at 19.50%. We foresee another mixed day of trading across the fixed income space as CBN continues to conduct OMO auctions for liquidity controls.