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The Market Today - 27 November 2018

Oteh talks up merits of African Trading and Settlements system                                               

Outgoing Vice President and Treasurer of the World Bank, Arunma Oteh urged the African Securities Exchanges Association (ASEA) to encourage the listing of more Small and Medium Enterprises (SMEs) in order to deepen the markets across the continent. At the opening session of the 22nd ASEA conference in Lagos, the outgoing vice president and treasurer urged the association to collaborate and work towards integrating the African Trading and Settlements systems which is due to become operational in Q1’19. The settlement system is an initiative of the African Export Import Bank (AfreximBank) which seeks to boost intra-African trade, by eliminating the need for a third-party currency in transactions. AfreximBank would act as the clearing house, converting the local currency of one African merchant to the local currency of the other African merchant. We are hopeful that the new settlement system would go a long way to improving intra-African trade but stress the need for the elimination of the more structural barriers such as high cost of trade, stemming from tariffs and logistics costs.                                               

Sustained bearish trading pushes ASI deeper into the red                                              

The Nigerian Stock Exchange closed 46bps down yesterday, with negative performances recorded across all key sectors except the Oil & Gas sector. Market activity was also particularly tepid with volume and value traded both printing below average. Market breadth was negative with 17 advances and 20 declines. While the ASI continued to shed only marginal points d/d, the sustained downward direction through the month has seen the index lose 287bps MTD. We foresee an extension of this trend in today’s session.                                            

Stock Watch: NB hit its 7-year low yesterday after losing 258bps to settle at ₦79.40. The stock has lost in three consecutive sessions and has lost 41% YTD.                                     

OMO auction douses market activities in the new week                                      

The CBN conducted an OMO auction yesterday, selling ₦161 billion (₦180 billion offered) across the 192DTM and 360DTM at stop rates of 13.00% and 14.50% respectively (Effective rate: 13.95% and 16.95%). Following this, market liquidity tightened at week open and the interbank call rate advanced 934bps to close at 15.17%. Meanwhile, the fixed income market traded flat yesterday, with mixed investors’ sentiment across the curve. Notably, yields in the treasury bills space declined a mere 2bps on average.  Similarly, trading was mixed in the bond market, with average yield on benchmark bonds staying unchanged in the bond space. Following tightened system liquidity on the back of the OMO auction, we anticipate tepid trading activities in the fixed income market today.