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Weekly Market Wrap - 16 June 2017

​Banking sector rally propels ASI

Closing off a week of mixed trading, the NSE ASI traded relatively flat today (up 4bps) to bring w/w rise to 160bps. Given the mixed trading pattern at week close, we foresee more cautious buying sentiment at the start of next week, driven by increased profit-taking activity on select stocks.

Stock Watch: CCNN has rallied 92% in a sixteen-session bull run and now trades at ₦8.85, over a one-year high and above consensus target price of ₦6.92.

T-bills market bullish on robust liquidity
Whilst trading was bearish at week open in the T-bills market following an OMO mop-up by the CBN, bullish sentiment quickly re-surfaced in the space as liquidity pressures eased in anticipation of and following a ₦205 billion OMO maturity inflow on Thursday. In reaction to the ample liquidity, the CBN announced a special OMO auction on Friday where it offered ₦206 billion on the 182DTM bill at a stop rate of 16%. Whilst the special auction did not hold, demand strengthened in the T-bills market at week close given that the rate initially announced for the special OMO was lower than current market levels. For the bond market, whilst trading was mostly flat through the week, demand filtered into the market at week close following the special OMO announcement with yields moderating 11bps on average.

In the currency market, the apex bank sold a total of $413.5 million at the inter-bank FX market on Monday. Following this intervention, we saw the gap between the rates at the parallel market (₦364.00) and the NAFEX window (₦365.29) tighten further. Overall, the NAFEX rate appreciated ₦7.96 w/w. We anticipate further convergence in the FX markets as the CBN continues with its liquidity injections in a bid to shore up the naira.