Weekly Market Wrap - 12 May 2017
Profit-taking caps ASI’s best week
Following a 10-session bull run, the Nigerian bourse slipped 81bps at week close (ASI up 746bps w/w – 2017 high) as profit takers swooped in. Nonetheless given the strength of the gains, the NSE All-Share Index ytd return turned positive for the first time in 2017 at mid-week, posting a 490bps return ytd. Given that the ASI was almost solely dragged by losses in DANGCEM today and the key drivers of the rally (improving macro conditions, increased PFA and FPI participation) have not faded, we expect the NSE ASI to trade in the green in the coming week.
Stock Watch: After notching 152bps today, GUARANTY currently trades at an over one-year high of ₦30.00. The stock is on a five-session gaining streak and has returned 21.46% ytd.
May bond sale falls below offer
The bond market opened the week with little activity amid liquidity pressures and weak demand. At mid-week, the DMO conducted the May bond auction, offering ₦140 billion across 5-year, 10-year and 20-year tenors. Buying momentum returned to the bond market in the following days as yields adjusted to the lower-than-expected auction levels. Meanwhile, the bills market traded mixed over the week as the CBN conducted sporadic OMO auctions, putting further pressure on system liquidity. With the bullish momentum in the bond market cooling at week close, we expect more tepid trading at the start of the week. We also expect cautious trading on bills at the start of the week as market participants anticipate April inflation figures, due on Tuesday.
The CBN continued its policy of consistent interventions in the currency market, conducting a spate of spot and currency forward sales through the week. Amidst this, the naira depreciated ₦0.25 at the new NAFEX window and ₦1.00 in the parallel market to close at ₦382.44 and ₦387.50 respectively. We expect the consistent CBN foreign currency sales to support liquidity levels in the FX market and ease pressure on the naira.
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