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The Market Today - 22 February 2019

Second time lucky?

With the country poised for a second go-around at the general elections, we highlight the short-lived effect that the vote delay had on capital markets this week. Reactions on Monday were as expected, with jittery investors dragging the ASI 1.6% lower, likely pricing in additional risk in the market. However, the sell-offs were not as pronounced as some were expecting. The release of positive results by Zenith Bank on Tuesday turned sentiment around and returned the market to positive territory. The Fixed Income market however was relatively unaffected by the vote delay, with the uptick in yields forecast by analysts failing to materialize. In fact, yields have declined 98bps on average on the short-end of the curve and 33bps across the T-bills space so far, while the bond space has traded understandably flat. We attribute this to investors shifting focus to the shorter-end of the yield curve amidst increased long-term uncertainty. Perhaps the relative stability ion the run up to the polls had driven optimism among investors, with scarce confirmed reports of violence around the country – a factor which somewhat mired the 2015 polls. Whilst the week-long delay has cost the Nigerian economy an estimated c.₦350 billion, capital markets have remained fairly resilient amidst the disorganization of the Independent National Electoral Commission. Should the polls hold as scheduled tomorrow, we foresee a swing around to positive activity in the capital markets the following week.

Market pulls back slightly following a mixed session                                            

Following a mixed trading session, the NSE ASI moderated 14bps yesterday, driven by red closes across select Banking and Consumer Goods stocks. Market activity also declined d/d, with value traded printing at ₦2.2 billion. Market breadth was positive with 21 advances and 15 declines. As investors reposition cautiously ahead of the scheduled elections on Saturday, we expect further varied sentiment to drive trading activity at week close.                                           

Stock Watch: UCAP released its FY’18 results yesterday, reporting a top-line and bottom-line of ₦9.3 billion and ₦4.3 billion respectively (a change of +3.9% and -6.7% respectively compared to their FY’17 figures. The stock lost 6% yesterday to settle at ₦3.27.             

CBN mops up ₦688 billion in first OMO of the week                                             

Amid a ₦579 billion maturity, the CBN conducted an OMO auction yesterday, selling c.₦688 billion (offer: ₦650 billion) across the 98DTM, 189DTM and 364DTM bills at stop rates of 11.90%, 13.50% and 15.00%. Meanwhile, the Interbank Call rate declined 133bps to close at 13.67%. Following the net outflow, we do not anticipate another OMO auction today and expect quiet trading in the T-bills market due to tightened liquidity. Also, we anticipate tepid trading in the bonds space as investors hold off on the long-end of the space until the polls conclude.