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Weekly Market Wrap - 9 February 2018

Profit taking steers NSE ASI to a notable red w/w close                                  

The Nigerian equity market rounded off the week on a negative note, losing 46bps to mark the first all-red week in 2018 (-339bps w/w) – cutting ytd returns to 12.8%. With sell pressure persisting at session close, we expect that the negative sentiment will filter into week open trading.                                       

Stock Watch: It was an all red week for FIDELITYBK as investors swooped in to take profit on the stock, pushing it 12% downwards. The stock trades at ₦3.26, above consensus target price of ₦2.52 and has returned 33% ytd.                                           

Tight liquidity, U.S. rates uncertainty drive bearish FI week                                           

Despite an initial surge in demand for T-bills at week open, liquidity constraints as well as concerns about possible interest rate hikes in the U.S. kept yields in the T-bills market under pressure till week close. Overall, yields advanced 46bps w/w on average in the space. The bond market was similarly bearish this week. Sell pressure (particularly from the foreign investors) was evident towards the end of the week, with yields rising 36bps across benchmark bonds through the week. Whilst we expect FI trading to remain bearish at week open, we anticipate a pickup in buying activity from Tuesday, with liquidity expected to be buoyed by the incoming coupon on the 15.54% FGN FEB 2020 note. We expect strong participation at next week’s T-bills primary market auction, where the CBN would offer ₦170 billion across the mid-dated (182DTM) and long-dated (364DTM) T-bills. Also, we expect the anticipated OMO maturity of ₦74.7 billion scheduled for next Thursday to support demand towards week close.

On the currency front, the CBN continued its interventions, notably injecting another c.$210 million at week open across various FX windows. Amidst these, the naira appreciated ₦0.43 at the I&E FX Window and remained flat in the parallel market to close at ₦360.27 and ₦362.00 respectively against the dollar. We expect currency liquidity to remain relatively buoyant as the CBN continues to inject foreign currency into the system.