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The Market Today - 30 November 2018

Naira hits ₦370/$1 in parallel market                                                                   

The naira weakened to ₦370/$1 on the parallel market yesterday, as currency traders reportedly hoarded foreign currency amid fears that the sharp fall in oil prices would precipitate a dollar shortage. The last time the currency touched that level in the parallel market was August 2017. The Central Bank of Nigeria (CBN) has consistently intervened in all windows of the foreign exchange market—spending roughly $2.2 billion in October alone—to prop the currency, but this has led to a fall in foreign reserves. CBN data showed that foreign reserves stood at $41.9 billion yesterday, down from its recent peak of $47.8 billion in June 2019. Given the current depreciation pressure on the currency, the apex bank would likely need to step up its efforts to supply dollars in the market and tighten naira liquidity.              

ASI continues bleeding, sheds 133bps d/d                                                            

Down 429bps in five consecutive red sessions, the ASI lost 133bps yesterday, with three of four key sectors dragging the market yet again. Furthermore, whilst turnover was higher than average on the back of STANBIC trades, market sentiment stayed negative throughout the day. Market breadth remained negative with 11 advances and 23 declines. Following four straight negative closes this week and the unrelenting bears on the bourse, we expect today’s trading session today to close in the red. That said, we acknowledge the possibility of investors taking advantage of depressed stock prices at week close.                                                           

Stock Watch: FCMB released its 9M’18 yesterday, with topline and bottom-line coming in 12% and 107% ahead of 9M’17 figures respectively. The stock has lost in 5 consecutive sessions and is currently trading at a year low of ₦1.32, 10.81% below its year open.                                                                                                                                  

OMO rates close significantly higher                                                                      

The CBN conducted an OMO auction yesterday, offering ₦600 billion and selling ₦372 billion across the 98DTM, 182DTM and 364DTM bills at stop rates of 11.65%, 13.20% and 14.75% respectively (effective yields: 12.03%, 14.13% and 17.29%). The stop rates came in higher than previous auction rates and current secondary market rate. With liquidity improving to c.₦300 billion, the interbank call rate declined 334bps, closing at 13.83%. In spite of currently healthy system liquidity, we foresee an uptick in secondary market rates today as yields adjust towards yesterday’s OMO levels.