The Market Today - 23 August 2018

Q2’18 Capital Importation declines by 13% q/q                                                

According to data recently released by the National Bureau of Statistics, the total value of capital imported into Nigeria moderated 13% q/q to $5.5 billion in Q2’18, albeit still representing a significant improvement from the $1.8 billion recorded in Q2’17. A breakdown of the capital importation statistics showed that the q/q decline was driven by a 10% and 24% moderation in Foreign Portfolio Inflows (FPI) and Other Investments respectively, both offsetting a 6% q/q rise in Foreign Direct Investment over the quarter. Notably, the decline in FPIs was solely driven by a 24% q/q moderation in investments in Money Market Instruments amid a notable 49% q/q rise in equity market investments. Overall, FPIs continued to account for the largest portion of total foreign inflows into Nigeria, at 75% as at Q2’18, while Foreign Direct Investments contributed the least at 5%.                                                                

ASI closes down ahead of two-day break                                                            

"The market returned to negative territory at week open (ASI: -171bps) with all key sectors closing down. Market sentiment remains visibly negative with declines across major large caps in all key sectors and a widely negative market breadth. As such, we foresee another slow start to trading when the market resumes today.                                   

Stock Watch: ZENITHBANK has lost 7% in the last 5 sessions. In line with the broader market rout, the stock has closed in the red seven out of eleven sessions. Currently trading at ₦21.85 (ytd: -15%), the stock trades below our target price of ₦35.11.                                                  

Trading remains tepid as weak demand persists                                                              

The interbank call rate advanced 150bps to 8.33%, but despite this, trading in the T-bills space was slightly positive as yields declined 6bps on average. Buying was concentrated on the short-mid end of the space, with yields on the 150DTM and 115DTM bills moderating 31bps and 30bps to settle at 13.04% and 12.41% respectively. Meanwhile, trading in the bond space remained tepid, with selling concentrated on the long-dated maturities as yields rose 10bps on average. In particular, yield on the 16.25% FGN APR 2037 bond rose 76bps to settle at 14.93%. We expect demand on short-dated instruments to be supported by today's ₦514 billion OMO maturity, although buying would be capped by any liquidity mop up. We anticipate tepid trading on the long end as demand remains weak.