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Weekly Market Wrap - 21 September 2018

Bargain hunting lifts ASI to positive w/w close                                                 

Investors capitalized on beaten down stocks to take the bourse to an 18bps close today, capping off a mildly positive week as the index rose 66bps w/w – first positive w/w close in five weeks. The week was dominated by investor interest in down-trodden stocks, with the Banking sector seeing the most activity. We foresee a continuation of this at week open, with the gains fizzling out as the week progresses amid still weak investor sentiment.                                                     

Stock Watch: After gaining 16% w/w to close at ₦5.80, UBN was the best performing banking stock this week. The stock has lost 26% ytd and is 34% below its year-high price of ₦8.78.                                                       

Healthy liquidity steers market to a positive week                                                        

The CBN mopped up ₦388 billion in an OMO auction during the week amid maturities of ₦182 billion. Despite this, system liquidity remained buoyant at ₦518 billion and the interbank call rate declined 17bps to 4.00% at week close. Trading across the fixed income market was bullish over the course of the week. Yields in the T-bills market declined 18bps on Friday (-151bps w/w) with notable declines on the 20DTM (-90bps to 8.38%) and 62DTM (-42bps to 12.29%) bills. Trading in the bond space was likewise positive, with demand concentrated on short to mid-term maturities amid a 7bps yield decline across benchmark bonds (-24bps w/w). In particular, yields on the 15.54% FGN FEB 2020 and 16.39% FGN JAN 2022 bonds moderated 27bps and 42bps to settle at 14.27% and 14.69% respectively. We expect persistent buoyant liquidity to support buying in the T-bills market at week open. However, we anticipate more cautious trading on bonds ahead of the Central Bank of Nigeria Monetary Policy meeting (Monday & Tuesday) and the September Bond Auction (Wednesday).                                                      

The CBN continued its intervention in the Foreign Currency market this week, injecting $210 million at the inter-bank foreign exchange on Tuesday. The naira depreciated ₦0.50 w/w at the I&E FX Window to settle at ₦363.68 against the dollar while remaining flat at ₦359.50 in the parallel market.  We expect the naira to remain stable across the various windows of the currency space as the CBN continues to intervene in the FX market.