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The Market Today - 31 January 2018

NSE pricing amendments drive small cap liquidity                                                

Following the amendment of the Nigerian Stock Exchange (NSE) pricing methodology and the effective revision of the price floor for stocks trading on the exchange to ₦0.01 (previous: ₦0.50), we have observed increased activity on the stocks previously stuck at ₦0.50. In particular, a number of stocks in the NSE Insurance Index have received notable interest this week as investors swoop to acquire them at prices below ₦0.50. We are unsurprised by this development as the adjustment to the price floor aids price discovery and market liquidity by allowing willing buyers and sellers to trade a stock below its par value. With a number of stocks still sticky at ₦0.50 despite the pricing amendment, we foresee this trend continuing as investors look for bargains in the market.                                                

Equity market continues on positive run                                       

Gains persisted in the Nigerian equity market yesterday as the NSE ASI closed 42bps higher on the day. With persistent positive sentiment in the equity market, evidenced by consistent green closes and widely positive market breadth, we expect a similar trading pattern today.

Stock Watch: Yesterday, FLOURMILL released its 9M’17/18 results, showing year-on-year increases in top and bottom lines by 10% and 79% respectively. The stock currently trades at ₦30.85 and has returned 6% ytd.                                                       

T-bills space bullish ahead of PMA                                      

The CBN conducted an OMO auction yesterday, offering ₦100 billion and ₦250 billion across the respective 87DTM and 254DTM bills. Although no sale was made on the short-dated bill, the bank sold ₦191 billion on the 254DTM bill at a stop rate of 14.40% (effective yield: 16.00%). The T-bills market traded relatively bullish ahead of today’s PMA, with yields declining 18bps on average. On the other hand, trading in the bonds space was largely tepid as yields on benchmark bonds inched up 1bp on average. We expect investors to tread cautiously ahead of today’s primary market auction where the CBN will offer ₦246.78 billion across the 182DTM and 364DTM bills. Meanwhile, we foresee continued tepid trading in the bond space, barring any significant news inflow.