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The Market Today - 06 October 2017

Foreign inflows gain traction in August 2017                                           

According to the Nigerian Stock Exchange Domestic and FPI Report for August 2017, total participation in the Nigerian stock market rose from ₦194 billion in July to ₦397 billion in August, the highest recorded ytd. Drilling down, we note that this increase was on the back of a significant jump in foreign portfolio transactions (₦208 billion vs. July: ₦61 billion) which outweighed domestic participation (₦189 billion) for the first time this year. This brought ytd foreign participation to ₦699 billion, compared to ₦369 billion in the corresponding period of 2016. Whilst this recorded increase in participation is consistent with stronger NSE ASI turnover for August, we note that market activity waned in September amidst a paucity of catalysts to spur investor activity. Nonetheless, we expect market activity – particularly from foreign participation – to be relatively strong in Q4’17 as investors react to a fresh batch of earnings announcement for 9M’17 and amidst potential asset reallocation from fixed income securities as yields decline in that space.

Nigerian bourse gathers steam – ASI up 117bps                                      

Bulls prevailed in the Nigerian Equity Market as the NSE ASI gained 117bps yesterday. We note the improved market breadth and strong positive closes across key sectors in yesterday’s session. Amidst renewed demand, particularly in Industrials, we foresee another positive trading session today.

 Stock Watch: Guinness Nigeria Plc. announced that its ₦39.70 billion Rights Issue was successful – with a 116% subscription rate. We note that interest in the Rights Issue would have been driven by a sustained discount between the Rights Price (₦58.00) and the price at the secondary market during the period. GUINNESS currently trades at ₦98.50, above consensus target price of ₦71.80 and has returned 19% ytd.

T-bills remain bullish as bonds turn quiet                                      

With Wednesday’s Primary Market Auction posting lower stop rates and amidst the OMO maturity, sentiment in the T-bills market remained bullish as yields declined 17bps on average. Following sizeable buying in the previous sessions, the bond market was quieter in yesterday’s session, with a slightly bearish bias as yields on benchmark bonds up 2bps on average. Whilst buying sentiment is expected to persist in the fixed income market at week close, we foresee further liquidity tightening by the CBN further limiting the buying momentum in the market.