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Weekly Market Wrap - 9 June 2017

ASI wraps the week with large gains as bellwethers rise
Following strong gains across key sectors, the Nigerian equity market rose 103bps today to close the week 607bps higher – the third consecutive w/w gain. Whilst we expect the strong buying sentiment to filter into trading at week open, we emphasize caution on select stocks that have risen significantly in the past weeks.

Stock Watch: In contrast to the emergence of profit taking on larger Tier I names, STERLNBANK has held on to gains, advancing 47% over eight sessions to close the week at a 2017-high of ₦1.06. The bank has returned 39% ytd.

Bills stay mixed at week close amidst pressured liquidity
With buoyant liquidity supporting buying interest, the T-bills market opened the week largely bullish with yields moderating across the curve. Amidst consistent mop ups and foreign currency injections, system liquidity tapered off towards week close and trading turned mixed. The bond space was relatively quiet with a bearish bias amidst declining interest in the space. Whilst the market remained largely muted at mid-week, activity was tilted towards buying with some offshore interest propping up the market. At week close, the bond market turned mixed with the mid-dated bonds retaining buying interest. Amidst pressured system liquidity, we expect trading in the bills space to remain cautious ahead of next week’s Primary Market Auction to be held on Wednesday, with the CBN offering ₦214 billion across 91DTM, 182DTM and 364DTM bills.

The CBN continued its liquidity injections into the foreign exchange market. On Monday, the CBN released an update to the guidelines for the “Investors & Exporters” window. The new guideline allows dealers to trade amongst themselves without prior CBN approval. The guideline requires that funds purchased from an Authorized Dealer be utilized the same day and cannot be sold to another Authorized Dealer. Amidst this, the naira appreciated ₦6.50 in the parallel market and ₦5.28 at the NAFEX window to close at ₦364.50 and ₦371.00 respectively against the dollar. We expect this new development to further deepen liquidity in the window as Authorized Dealers act as intra-day liquidity providers.