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Weekly Market Wrap - 23 June 2017

Market halts bull rally, ASI slips 499bps w/w
The Nigerian bourse rounded off the week with a 245bps loss following continued profit taking activities across major sectors. With profit taking and oil price concerns the major themes of the week, the ASI fell 499bps w/w, marking the first w/w decline in five weeks. Given the sustained negative market sentiment at week close – indicated by the widely negative market breadth today and through the week – we expect bearish trading to extend into next week.

Stock Watch: Whereas the rally in larger Pharmaceutical names looks to have cooled, NEIMETH has recorded a 51% rise over the past six sessions. The stock currently trades at a 2017-high of ₦0.98, returning 26% ytd.

T-bills trade mixed at week close on liquidity injection
The bond market opened the week on a slightly bearish note, with selloffs observed on select tenors even as trading activity in the space remained relatively muted. At week close, the market turned mixed as demand waned in the space. Amidst tight liquidity, the T-bills market was similarly bearish at week open. The market bounced back briefly on Tuesday but was eventually stifled with selloffs recorded across the curve at midweek. At week close, amidst FAAC disbursements, trading turned mixed as buying sentiment returned to the mid-long dated maturities, while the short end remained largely bearish. Barring any aggressive mop ups by the CBN, we foresee increased demand in the T-bills market, spurred by the FAAC injection and the anticipated ₦236 billion OMO maturity next week, though the bond space should remain mixed.

The Central Bank of Nigeria (CBN) continued to support currency liquidity through consistent sales of foreign currency at several spot and forward auctions. Notably, the apex bank sold $195 million at week open across various segments of the currency market. Also, a total of $431 million (previous: $466 million) was traded at the NAFEX window this week. Amidst this, the naira appreciated ₦3.13 at the NAFEX window but depreciated ₦0.50 in the parallel market to close at ₦362.16 and ₦375.50 respectively against the dollar. We expect the CBN to sustain the liquidity improvement through consistent injections of foreign currency in the market.