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Weekly Market Wrap - 01 February 2019

February starts on a mildly positive note, ASI up 26bps                                                

Following successive negative performances in four out of five sessions, the ASI posted a mildly positive day on Friday, gaining 26bps d/d, albeit down 2.51% w/w. In line with trend in the past few weeks, we see the possibility of a recovery in the market next week driven by bargain hunters. That said, though we expect cautious sentiment to remain prevalent ahead of the elections, we foresee select fund managers taking positions in beaten down stocks as the elections draw closer.                                                   

Stock Watch: DANGFLOUR lost 3% today to bring its losses this week to 11%. The stock recorded red closes in three out of five sessions and is currently trading at ₦5.80, down 15% YTD (Consumer Goods sector: -7% YTD).                                                              

Demand persists in FI market despite tightened liquidity                                                           

This week, the CBN sold ₦536 billion (₦750 billion offered) across three OMO auctions at 11.90%, 13.50% and 15.00% across the short, mid and long-term maturities. Similarly, a T-bills PMA was also conducted selling ₦255 billion at stop rates of 11.00%, 13.50% and 15.00%. Despite the mop ups and lower system liquidity, trading in the treasury bills market remained positive with yields declining 41bps w/w (-25bps d/d). Despite constant liquidity tightening by the CBN during the week, demand for T-Bills has remained fairly upbeat, thus we expect yields to decline further at the start of the week, albeit marginally. In the bonds space, we foresee further mixed trading with a slant towards buy-side activity.                                                      

The Naira depreciated ₦0.25 w/w at the I&E FX Window to settle at ₦362.71 against the dollar and appreciated ₦2.50 w/w to settle at ₦360.00 in the parallel market. We expect the naira to remain largely stable across the various windows of the currency space as the CBN maintains interventions in the FX market.