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Weekly Market Wrap - 25 January 2019

NSE ASI extends positive trend, erases YTD losses NSE ASI extends positive trend, erases YTD losses

After recording gains in four out of five sessions, the ASI posted another positive w/w return, gaining 141bps and erasing YTD losses to 0.01%. While the strong gains from this week create a high chance for bargain hunting across select stocks, we believe trading activities will remain tilted towards buying as more investors begin to take positions in beaten down stocks in anticipation of a dispersion in political clouds post-elections.

Stock Watch: FCMB gained 22% w/w after gaining in all five sessions this week. The stock recorded an almost 10% gain in today’s session to close at ₦2.15, its highest price since July 2018, and is up 14% YTD (Banking sector: +2% YTD).

Treasury bills remains bullish despite liquidity constraints

This week, the CBN sold ₦787 billion (₦1.35 trillion offered) across five OMO auctions every day this week at 11.90%, 13.50% and 15.00% across the short, mid and long term maturities. Notably, the DMO released the long-awaited January Bond Auction Circular by Wednesday, indicating an offer of ₦150 billion across the 5-year, 7-year and 10-year maturities at next week’s auction. Meanwhile, the Interbank Call rate declined 325bps w/w to close at 12.08%. Whilst we anticipate tepid trading in the T-bills space due to liquidity constraints, we foresee modest sell-offs in the bond space as investors prepare to partake in the bond auction scheduled for Wednesday.

The Naira appreciated ₦0.33 w/w at the I&E FX Window to settle at ₦362.46 against the dollar and depreciated ₦2.00 w/w to settle at ₦362.50 in the parallel market. We expect the naira to remain largely stable across the various windows of the currency space as the CBN maintains interventions in the FX market.