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Weekly Market Wrap - 18 January 2019

ASI records first fully positive week since July 2017                                                       

In a positive turn of events, the ASI recorded positive performances every day of this week for the first time since July 2017 leading to a 394bps gain w/w. With positive investor sentiment returning to the market this week, we are cautiously optimistic. Whilst we expect buying momentum to fizzle out on cement stocks, we foresee some buy interest in depressed Tier-1 banking stocks.

Stock Watch: DANGCEM gained 10% in four sessions this week. The stock gained 3% today to close at ₦194.90 and is up 3% in 2019, underperforming the Industrial Goods sector (9% ytd).                                   

Yields decline despite high primary market activities                                                   

This week, the CBN sold ₦575 billion (₦700 billion offered) across three OMO auctions on Monday, Tuesday and Thursday at the 11.90%, 13.50% and 15.00% across three maturities. The CBN also sold ₦152 billion (₦225 billion offered) at its bi-weekly PMA, raising the stop rates across the three maturities from previous PMA levels to 11.00%, 13.10% and 15.00%. Meanwhile, the Interbank Call rate declined 467bps to closs at 15.33% w/w. We expect the anticipated release of the bond calendar on Monday to spur mild sell-offs in the bond space, whilst tepid trading is expected to continue in the T-bills space due to liquidity constraints. Meanwhile, trading activities will also be directed by the Monetary Policy Committee meeting and a bond auction scheduled for midweek.                                          

The Naira appreciated ₦2.15 w/w at the I&E FX Window to settle at ₦362.79 against the dollar and appreciated ₦ 0.50 w/w to settle at ₦360.50 in the parallel market. We expect the naira to remain relatively stable across the various windows of the currency space as the CBN maintains interventions in the FX market.