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Weekly Market Wrap - 11 August 2017

Key sectors close in the green at week close                                      

The NSE ASI closed 25bps higher today, recovering from previous day’s loss to round off a relatively positive week. Overall, the market closed the week 207bps higher, lifting ytd gains to 42%. With apparent profit-taking on some banking names despite the release of better than expected performance from ZENITHBANK, we anticipate cautious trading at week open.                                    

Stock Watch: GUINNESS gained 27% during the week and now trades at a 9-month high of ₦91.50. We recall that the company opened its rights issue on the 24th of July at a price of ₦58.00 per share.             

Liquidity squeeze incites sell-offs in T-bills market                                        

With tight system liquidity capping demand, the T-bills market traded with a bearish tilt from week open through mid-week as yields trended northwards across the curve. A respite came on Thursday as demand was supported by a ₦113 billion OMO maturity, as well as news flow about the FG refinancing $3 billion (₦915 billion) worth of T-bills with dollar debt. However, with persistent CBN mop ups pressuring system liquidity, the T-bills market turned bearish at week close with yields advancing 210bps on the average. Meanwhile, the bond market traded muted through the week amidst sustained liquidity pressure and tepid demand.                                   

We expect persistent CBN liquidity mop up to cap demand on T-bills at the start of next week even as waning interest on long-dated maturities keeps the bond market relatively quiet ahead of Wednesday’s bond auction. We expect consistent CBN foreign currency sales to support liquidity in the FX market and ease pressure on the naira.