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Weekly Market Wrap - 22 June 2018

Short week dominated by Negative trading                                                       

Sentiment at week close persisted bearish, with the NSE ASI ended the day (-76bps) and week (-274bps) in negative territory, after losing every session in the shortened week. Sentiment this week was largely bearish, characterized by huge losses in select large caps. Though there is still some room for further losses, we foresee bargain hunting at week open as investors take position on depressed stocks.                                                                                                                                                                                                                                                                                                                                                                                                                 

Stock Watch: SEPLAT shed 9% this week, pressuring the Oil & Gas sector to a 594bps w/w decline. The stock currently trades at a price of ₦685.00, below our target price of ₦970.18 and has returned 9% YTD.                                                             

No auction despite buoyant liquidity                                                    

Despite the absence of a liquidity mop-up today, sentiment in the T-bills space turned negative, with yields advancing 7bps on average. Specifically, while yields on the 27DTM and 195DTM bills declined 21bps and 62bps to settle at 12.51% and 12.74% respectively, yields on the 41DTM and 223DTM bills advanced 23bps and 65bps to settle at 13.07% and 13.20% respectively. Meanwhile, trading in the bond space was mixed, with demand heavy on the shorter-dated bonds. Overall, yields on benchmark bonds advanced 3bps on average. Overall, the fixed income market was largely bearish this week, with yields on T-bills and benchmark bonds rising 20bps and 24bps w/w on average, respectively. Barring an OMO auction by the CBN to mop-up liquidity at week open, we expect buoyant system liquidity (₦842 billion) to support buying at the start of next week.                                                        

The CBN continued its regular spate of FX interventions in the FX market, notably infusing $210 million through multiple windows at week open. Amidst this, the naira appreciated ₦0.07 w/w at the I&E FX Window to close at ₦361.00 against the dollar but remained flat w/w in the parallel market at ₦361.00. We expect the naira to remain stable across the various windows of the currency space as the CBN continues to intervene in the FX market.