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The Market Today - 6 June 2018

Is the Equity market recovery sustainable?                                                        

After opening the year with a strong rally across all key sectors, the Nigerian bourse has been on a steady decline in the past four months with the ASI’s year-to-date returns declining from a high of 17.91% in January to -3.73% as at last week Friday. The notable downtrend which saw stock prices retrace to recent lows has been attributed to an early onset of political jitters from highly cautious investors ahead of Nigeria’s elections next year. The bourse has however posted a slight recovery so far this week, recording green closes for two consecutive sessions, a first since the end of April. The ASI has returned 282bps wtd amidst a strong comeback by large cap stocks like DANGCEM and NB. That said, we believe these gains are only a mild respite supported by bargain hunting across beaten down stocks, and thus believe bearish sentiment might resurface in the near term as election worries remain a front burner for investors.           

NSE posts stronger recovery as ASI gains 246bps                                                              

The Nigerian bourse closed well in the green yesterday, following positive performances in all but one key sector as bargain hunters swooped in across a host of stocks to lift the market. Market made a stronger statement in yesterday’s session with a markedly positive market breadth indicating the broad based recovery. We believe the market is in for another bullish session today amidst the notable uptick in sentiment and as stock’s further pare huge prior losses.                                                               

Stock Watch: ETERNA has gained 31% over the last six sessions. The stock currently trades at a price of N6.92 and has returned 70% YTD, compared to the Oil & Gas sector’s YTD return of 3%, making it the fourth best performing stock on the exchange.                                                            

Mixed sentiment prevails in fixed income market                                                         

In the absence of an OMO auction, the Interbank Call rate declined to 3.50% (previous: 3.92%). Sentiment in the T-bills market persisted mixed in a largely quiet session, yields moderated a modest 5bps on average. Similalry, sentiment in the bond space was varied as yields on benchmark bonds closed relatively flat on average (-1bp). We expect market to remain quiet today with mixed sentiment across both spaces, ahead of tomorrow’s OMO maturity and complementing liquidity mop-up as well.