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The Market Today - 27 July 2017

​NSE FPI Report shows healthy activity in June

According to the Nigerian Stock Exchange (NSE) June 2017 Foreign Participation Report, total foreign transactions rose from ₦95 billion in May to ₦102 billion in June, bringing Ytd foreign transactions to ₦430 billion, a 60% increase from H1’16 levels. The report also shows that proportion of foreign participation has held relatively steady in the two years (H1’17: 46%; H1’16: 43%) as domestic transactions (₦505 billion) have also improved significantly compared to H1’16 (₦355 billion). We had previously highlighted a sharp upturn in trading turnover on the NSE (Q2’17 daily average: ₦4.1 billion, Q1’17 daily average: ₦2.0 billion) following the enactment of the “Investors & Exporters” foreign exchange (FX) window which permits easier entry and exit of capital into the market and has supported FX liquidity. We highlight that market sentiment remains strong, currently on a 15-day bullish run and posting a 37% ytd return. With macroeconomic conditions improving (Q2’17 GDP growth forecast: 2.1% vs. Q1’17: -0.5%) and blue chip firms expected to post strong H1’17 earnings, we expect sustained buoyant market activity.

Large cap stocks lift NSE ASI, up 340bps
Boosted again by strong gains across all key sectors, the Nigerian equity market notched 340bps (highest daily gain since 2 June,2017), stretching gains to fifteen sessions. Considering widening market breadth and consistent bullish trend (as seen in yesterday’s intraday chart), we foresee another green close for the NSE ASI today.

Stock Watch: DANGCEM has gained 18% in five consecutive sessions, following competitor WAPCO’s strong H1’17 earnings release. As DANGCEM is expected to post similarly positive numbers, we highlight the strong interest in the stock. DANGCEM currently trades at ₦245.00 and has returned 40.81% ytd.

Bulls maintain grip in the T-bills market
The CBN mopped up liquidity for the second consecutive day, with the apex bank offering ₦60 billion across the 191DTM and 338DTM bills. Bulls continued to prevail in the T-bills market albeit with notable sell pressure on select bills. Meanwhile, the bond market turned mixed with yields moving in opposite directions. With anticipated liquidity boost from OMO and bond maturities (₦85 billion combined), we expect yields to trend southwards in the fixed income market. However, continued CBN mop up may pressure liquidity and buying sentiment.