The Market Today - 27 September 2017
Healthy demand for debut sovereign Sukuk
According to the Debt Management Office (DMO), Nigeria’s debut sovereign Sukuk offering was successful, with a total subscription of ₦106 billion, compared to ₦100 billion on offer. The DMO also revealed that retail investors accounted for over 4% of this subscription, with the rest coming from pension and other fund managers, banks, and other institutional investors. We note that healthy demand for the Sukuk (priced at a rental rate of 16.47% p.a.) contrasts with tepid demand at recent Federal Government bond auctions, where the DMO has only sold 70% of total offered amount since the start of Q2’17. Nevertheless, the relative success of the Sukuk offering is a welcome development in Nigeria’s push to diversify its debt portfolio and cater to a wider pool of prospective investors.
NSE ASI slips further – down 115bps
Amidst improved market volumes, bears continued to dominate the Nigerian equity market yesterday, with the bourse losing 115bps. Despite the red close and negative intraday trading, we note the spike in market activity and resurgent demand on most Tier 1 banking stocks at the end of the session. We believe this would support the ASI in today’s session.
Stock Watch: ACCESS has declined 155bps in four consecutive sessions. However, we note that stock closed the session in the bid cart as investor interest spiked. ACCESS stock currently trades at ₦9.55, below consensus target price of ₦10.82, and has returned 63% Ytd.
Cautious trading across FI market ahead of MPC decision
The CBN conducted another OMO auction yesterday, offering ₦10 billion and ₦50 billion across the 93DTM and 184DTM bills respectively. Ahead of the MPC meeting held at market close, the T-bills market persisted mixed as yields trended in opposite directions. Notably, whilst yield on the 65DTM bill advanced 63bps to settle at 19.77%, yield on the 223DTM bill declined 24bps to settle at 19.31%. In contrast, demand was weighted on the long-dated bonds with yields on the 16.2884% FGN MAR 2027 and 16.2499% FGN APR 2037 bonds moderating 11bps each to settle at 15.91% and 15.92% respectively. With sustained OMO auctions continuing to pressure system liquidity, we expect varied trading in the T-bills market. We however foresee cautious trading in the bond space as investors await the bond auction results.
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