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Weekly Market Wrap - 21 July 2017

Positive earnings spur momentum on NSE                                           

Buoyed by investors’ reactions to positive earnings releases, the NSE ASI added 96bps at the close of week to make it five straight days of gain over the course of last week – up 2.28% w/w bringing ytd gains to 26.6%. As Q2’17 earnings season opens up further, we anticipate sustained improvement in market activities; today’s turnover totaled ₦5.1 billion (30-day average: ₦4.0 billion). And given market expectation of a relatively strong earnings outlook, we foresee more gains for the NSE ASI in the week ahead.                             

Stock Watch: Following the announcement of its crossing out of 2,080,104,955 units of ordinary shares from the Staff Share Investment Trust as well as its approval of interim dividend payment, UBA has gained 360bps. The stock currently trades at ₦9.12 (Consensus: ₦9.40) and has returned 103% ytd.                                      

T-bills market remains bullish amidst liquidity boost                                     

Despite OMO and Primary Market Auctions during the course of the week, trading remained upbeat in the T-bills market with yields moderating across the space, supported by liquidity inflows of c.125 billion. At the OMO auction, the CBN sold ₦86 billion (Offer: ₦120 billion) across the 195DTM and 356DTM bills with stop rates maintained at 17.95% and 18.55% (effective yields: 18.12% and 22.65%). As for the bond space, trading remained relatively quiet with mixed trading dominating the space all week.                                 

We foresee another OMO auction at the start of the coming week, the impact of which we believe would strain market liquidity this time around even as fresh liquidity is not expected to hit the system until Thursday (₦65 billion OMO maturity). That said, we foresee mixed trading in the T-bills market at the start of the week. In the bond market, we expect bearish bias to persist amidst sustained tepid trading activity in the market. However, we note that the ₦20 billion bond maturity may boost sentiment.