FREE

The Market Today - 24 May 2018

PFAs marginally increase equity allocations in Q1’18                                                     

Data from the Pension Commission (PenCom) for Q1’18 shows that Pension Fund Administrators (PFA) have marginally increased their allocations to domestic equities – from 8.9% as at the end of 2017 to 9.3% at the end of March 2018. We recall that the PenCom multi-fund guidelines rolled out early last year (to be implemented from H2’18) nudges PFAs to increase their participation in equities and other variable income instruments. We expect the implementation of the guideline, as well as the positive medium-term outlook for Nigerian equities, to boost PFA participation in the market going forward.                                                                  

Nigerian Stock Exchange continues under                                                          

With all key sectors save for the Oil & gas sector closing in the red, the Nigerian bourse shed another 25bps yesterday, extending losses to five sessions. Market yesterday continued its bearish streak with all market indicators negative (red sector closes, negative market breadth and downsloping intraday trading). Thus, we foresee negative sentiment persisting today.                                                             

Stock Watch: Following the lifting of a 19-month technical suspension on IKEJAHOTEL, the stock has rallied 26% over the last three sessions. The stock currently trades at a price of N2.24 and has returned 26% ytd.                                                               

Bond yields advance amidst PMA                                                           

Yesterday, the DMO sold N50 billion (offer: N70 billion) at the bond auction across the 5-year, 7-year and 10-year tenors at stop rates of 13.50%, 13.50% and 13.55% (previous: 12.75%, 12.85% and 12.89%) respectively. Amidst this, the Interbank Call rate declined from 17.00% to 16.67%. Meanwhile, sentiment turned bearish in the secondary bond market, with yields on benchmark bonds advancing 7bps on average. However, trading was mixed across the T-bills market, albeit with yields rising 6bps on average. In line with the recent trend, we expect the CBN to conduct an OMO auction today to mop-up the expected liquidity inflow of N267 billion. Consequently, we anticipate mixed trading today amidst tightened system liquidity.