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The Market Today - 4 July 2018

Bears came in early amidst pre-election jitters                                                

Coming off a relatively strong performance in Q1’18 (+8.5%), largely propelled by a 16% surge in January, the Nigerian equity market took a U-turn in Q2’18. The bearish trend was evident at the end of the first quarter (March: -4.2%), and market dipped a further 7.8% in Q2’18 on the back of pre-election jitters and amid a broader selloff in emerging market equities. We note that this occurred despite signs of an improving economy – healthy macroeconomic indicators, strong oil prices and stable currency market. With Q3’18 kicking off with a 1.8% loss in the first two sessions, we don’t anticipate any respite for the market this quarter as uncertainty surrounding the upcoming elections becomes more pronounced. Moreover, we expect the risk-off sentiment towards emerging market equities to further weigh on the Nigerian market.                                                  

Bears maintain upper hand in Equity market                                                     

The Nigerian equity market continued to tip towards the sell-side extending losses by 90bps after all sectors closed in the red. We expect bears to remain dominant in trading activities on the stock exchange at mid-week as all market indicators point to sustained weak market sentiment.                                                   

Stock Watch: UNITYBNK has gained 25% over the last fourteen sessions. The stock currently trades at a price of ₦1.10 and has returned 108% YTD (Banking sector: -2% YTD) making it the second best performing stock on the exchange.                                                               

Little activity in the Bonds space of the F.I market                                                          

Amidst improved system liquidity and an absence of OMO auctions, Interbank Call rate declined to 19.33% yesterday (previous: 30.00%). Sentiment in the T-bills space remained sideways with a positive bias, with yields declining 9bps on average. Notably, yields on the 37DTM (-28bps to 11.83%), 93DTM (-52bps to 11.92%) and 226DTM (-70bps to 12.88%) bills declined. In the absence of any fresh offshore supply, we expect activity in the Bonds space to remain muted in today’s session. In the T-bills space, we expect investors to tread cautiously ahead of the primary market auction at which the CBN will be offering ₦171 billion across the 91DTM, 182DTM and 364DTM bills.