FREE

The Market Today - 7 September 2017

Foreign Participation dips in July                                    

According to the Nigerian stock exchange Domestic and FPI Report for July 2017, total participation in the Nigerian stock market dropped 12% in July to ₦194 billion. Drilling down to players, we note that the drop in participation was driven by a 40% decline in foreign portfolio transactions to ₦61 billion, whilst domestic transactions rose marginally in the same period by 13% to ₦134 billion. This drop in foreign participation is consistent with weaker NSE ASI turnover – from ₦5.5 billion in June to ₦3.7 billion in July. Despite this slowdown in foreign participation, foreign participation is up ytd – ₦491 billion vs ₦393 billion in 2016, as the equity market continues to gain traction, encouraged by improvements in foreign exchange market liquidity. We expect foreign participation and market turnover to remain strong for the rest of the year (ASI turnover rose to ₦4.8 billion in August), buoyed by still-improving macroeconomic variables, stability in the foreign exchange market, and the relative attractiveness of Nigerian equities.                               

Bulls make comeback on Nigerian stock market                                            

Following six straight sessions of losses, the Nigerian bourse finally reversed in yesterday’s session with the NSE ASI closing 57bps higher. Although the Nigerian bourse finally shook off the down trend with a positive close yesterday, we believe market sentiment remains largely varied and as such expect a mixed trading session today, albeit with a slightly bullish bias.                                

Stock Watch: UNILEVER has lost 17% over eleven sessions, only gaining slightly in yesterday’s session. The company’s ₦58 billion rights issue closes this Friday, September 8, 2017. The stock currently trades at ₦38.05 and has returned 9% ytd vs. sector average of 36%.                                 

Yields moderate despite liquidity mop up                                             

The CBN conducted another OMO auction yesterday offering ₦60.00 billion across the 92DTM and 183DTM bills, but eventually selling ₦40.31 billion across both maturities at stop rates of 16.00% and 17.95% (effective yields: 16.67% and 19.73%) respectively. Despite the liquidity mop up, buying momentum strengthened further in the fixed income market in yesterday’s session. Similarly, as demand from both local and foreign players intensified, yields on benchmark bonds moderated 9bps on average. Further supported by an anticipate ₦135.41 billion OMO maturity inflow scheduled for today, we expect yields to trend southwards. That said, we anticipate another OMO auction from the CBN in line with recent trend.