Weekly Market Wrap - 26 January 2018
Bears steer NSE ASI to first red w/w close in 2018
After four consecutive sessions of losses, the Nigerian equity market (+56bps) recorded a mini-recovery today as investors swooped in to hunt for bargains. However, earlier losses in the week led the bourse to its first negative w/w close for the year – down 293bps. We note the mild pick-up in sentiment on the exchange on Friday and we expect this to filter into week open trading as investors take advantage of beaten down prices.
Stock Watch: After 12 sessions of gains, tides turned for STERLNBANK this week as investors swooped in to take profit on the stock, pushing it 17% downwards despite a mild green close today. The stock currently trades at ₦1.91 and has returned 77% ytd.
Eurobond announcement revitalizes bond market
With the CBN maintaining its tight liquidity stance all week, trading in the T-bills market was largely mixed with a bearish bias through the week, save for Friday as FAAC inflow lifted demand in the space. Meanwhile, after opening the week on a slightly positive note, the bond market turned tepid as investors traded with caution ahead of Wednesday’s Primary Market Auction (₦110 billion offered and sold across the 5-year and 10-year notes). Notably, despite recording slightly higher stop rates at the auction, demand in the bond space strengthened on Thursday, following announcement of the DMO’s plans to raise $2.5 billion in the Eurobond market in Q1’18. Whilst we expect today’s FAAC inflow to support demand on fixed income instruments at the start of the week, we expect the persistent liquidity mop up from the CBN to cap the pace of yield declines.
On the currency front, the CBN continued its interventions, injecting another c.$210 million across various windows of the inter-bank foreign exchange market. Overall, the naira depreciated ₦0.25 at the I&E FX Window and ₦0.50 in the parallel market to close at ₦360.35 and ₦363.00 respectively against the dollar over the week. We expect currency liquidity to remain stable as the CBN continues to inject foreign currency into the system.
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