Weekly Market Wrap - 19 May 2017
Mixed trading pressures ASI’s momentum
Coming off three consecutive sessions of modest gains, momentum slowed on the Nigerian bourse at week close (NSE ASI up 4bps) as persistent profit taking across Consumer Goods names depressed gains across other key sectors. The ASI was however down 28bps w/w largely due to the broad market profit-taking at week open. Whilst the slowing appetite across most key sectors (amidst profit taking) spell a weak start to the week ahead, we believe sentiment will strengthen along the week as the key drivers behind the market rally persist.
Stock Watch: Since losing 549bps at week open, FBNH has gone on a four-session gaining streak, rising 572bps in the process. The stock has gained 19.70% ytd, currently trading at ₦4.01.
Fixed Income market bearish amidst PMA
After opening the week mixed, the bills market turned bearish on Tuesday on the back of pressured system liquidity and higher than expected inflation reading for April. At mid-week, the Central bank of Nigeria (CBN) conducted a Primary Market Auction for bills offering and selling ₦111 billion at respective stop rates of 13.50%, 17.1490% and 18.70% - lower than secondary market levels. Meanwhile, the bond market opened the week slightly bullish before reversing trend amidst the April inflation figure and ahead of next week’s Monetary Policy Committee (MPC) meeting. Notwithstanding re-emerging demand on bills, we expect cautious trading in the fixed income market at the start of the coming week as all eyes turn towards the MPC meeting on Monday and Tuesday.
The CBN sustained its consistent interventions in the currency market, conducting a couple of spot and forward auctions. Worthy of note is the currency sale on Monday, where the CBN injected c.$457 million across the different FX windows. Over the week, the naira appreciated ₦0.83 and ₦6.50 at the respective NAFEX and parallel markets to close at ₦381.61 and ₦378.00 against the dollar. We expect CBN interventions to sustain liquidity in the foreign exchange market as investors continue to test the waters at the NAFEX window.
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