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The Market Today - 25 May, 2017

Capital importation estimated at $908 million
According to National Bureau of Statistics, a total of $908 million was imported as capital into Nigeria for Q1’17, the second lowest value recorded in 10 years. Though this was 28% higher than in Q1’16 ($711 million), it was 41% less than Q4’16 capital import ($1,549 million). The main driver of the quarterly decline was a 58% fall in “Other Investments” and a 39% decline in Foreign Direct Investment. Meanwhile the only recorded increase was in Foreign Portfolio investment (FPI) which rose 10% to $314 million. Within FPI, inflows into money market instruments ($212 million) were the main contributor, followed by inflows into equity ($102 million) as the data showed no record of inflows into bonds. With the NAFEX window improving liquidity in the foreign exchange market and stronger macro-economic conditions – Q1’17 GDP recorded a smaller-than-expected contraction of 0.5%, we expect that Q2’17 capital importation figures would come in stronger.

Bellwether stocks lead ASI to second day of gains
The Nigerian bourse closed higher for the second day in a row bolstered by strong gains in blue chips. Despite most bellwethers trading at/close to year-highs and the cautious trading approach seen in more recent sessions, we believe today’s positive close reflects a return of buying sentiment. We therefore expect the ASI to trade higher today.

Stock Watch: UACN slipped to its fifth consecutive loss after dropping 131bps yesterday. The conglomerate recently announced a rights issue proposal of ₦15.4 billion to support working capital as well as enhance the capital position of some subsidiaries. UACN has lost 15% ytd.

Interventions weigh on demand in fixed income market
With liquidity still pressured, demand weakened in the fixed income market yesterday. The bills market traded mixed (with a bearish bias) as yields trended in opposite directions. The bond market was similarly mixed on a day of relatively muted trading activity. With tight liquidity still suppressing demand, we expect another bearish trading pattern in today’s session.