Nigeria Capital Market: Week Ended 24th April, 2015

Nigerian Stock Market Weekly Summary and Outlook
The market continued to trade sideways this week as investors treaded more cautiously. The NSE ASI shed 1.5% W-o-W settling at 34,485.72 at the close of trade on Friday. Nevertheless, MtD return closed positive at 8.6% although YtD was negative at 0.5%. Following the course of the benchmark index, aggregate market capitalization declined N779.1bn W-o-W and closed at N11.7tn. Market activity was mixed with the aggregate volume of stocks traded rising 7.5% to 2.1bn units while aggregate value traded for the week declined 11.5% to N17.2bn.
The Insurance (+2.6%) and Industrial Goods (+0.6%) sectors trended northwards respectively. On the contrary, Consumer Goods, Banking and Oil and Gas sectors all trended southwards, depreciating 2.0%, 1.9% and 0.8% respectively as sell pressure was sustained on key counters in the sectors during the week. Unity Bank’s 1:10 share reconstruction was effected on Monday, hence the counter closed at N5.00 as against N0.5 the previous sessions. Although more Q1:2015 corporate releases were posted during the week, investors’ reaction remained largely calm as most of the numbers posted were unimpressive.
Market breadth stayed positive (1.1x) as 40 stocks advanced while 35 stocks declined. 108 stocks however closed flat. RTBRISCOE (+26.3%), NEIMETH (24.2%), NPFMCRFBK (18.8%) and PZ (15.7%) were the best performing stocks for the week, while IKEJAHOTEL (-22.1%), COSTAIN (-16.0%), FIDELITYBK (-12.0%) and TRANSEXPR (-10.0%) were the market laggards. We expect the market to continue to trade sideways in the week ahead, even as more corporate releases are expected to come through.

Money Market Review and Outlook
Money market rates for this week were quite moderate as average Open Buy Back (OBB) and Overnight rates settled at 15.1% and 16.2% respectively. This was due to modest levels of liquidity throughout the week. At a liquidity Opening Balance of N112.2bn on Monday, OBB (14.2%) and Overnight rates (14.6%) opened below the week’s average (15.1% and 15.2%). However, both the OBB and Overnight rates rose 5.8% and 7.2%on Tuesday to settle at 20.0% and 21.8% accordingly.
With no liquidity inflow at the beginning of the week, Money Market rates increased further on Wednesday, closing at 21.8% (OBB ) and 23.9% (Overnight rate) respectively. Nevertheless, rates fell to 10.2% (OBB) and 10.8% (Overnight) on Thursday, as three T- Bills instruments worth N169.4bn matured. The OBB and Overnight rates however eased to 9.3% and 10.0%respectively at the close of the market on Friday. In anticipation of N535.0bn bond maturity which hit the system today; the full impact is expected to crystalize in the coming week. Hence, we anticipate moderation in rates as liquidity levels is expected to remain robust.

Foreign Exchange Market Review and Outlook
The Naira opened the week at the rate of N199.10/US$1.00 in the interbank market, appreciating by 1 kobo from last week’s closing. In line with our expectation last week, the local unit traded at a tight range throughout the week, oscillating between N199.10/US$1.00 and N199.13/US$1.00.
The foreign exchange market witnessed inflows from dollar auction sales by international oil companies on Tuesday. This injection, however, did not affect the interbank market exchange rate. The exchange rate depreciated by 3 kobo to close at N199.13/US$1.00 on Friday while the Central Bank of Nigeria’s clearing rate remained N197.00/US$1.00 throughout the week.
Following the move of the Central Bank to defend the naira by placing a limit on spending for overseas card holders to US$50,000 (from US$150,000) per annum and daily cash withdrawals to US$300, customers (especially traders and travellers) have increased their demand for the greenback to augment cash required for their transactions. With the recent stability in the currency market, we expect the naira to remain at current range in the week ahead.

Bond Market Review and Outlook
The performance of bonds during the week remained optimistically calm in line with our earlier expectation. Fixed income market’s fundamentals remained overtly serene around stable interest rate, credit rating and funds flow across different tenured instruments. On the average, bond yields opened the week at 14.7%, traded as high as 14.8% towards mid-week before settling at 14.0% at the close of the week while yields on the whole moderated by 0.7% Week on Week (W-o-W). As measured by the FMDQ bond index, total bond market in the week traded higher by 0.7%. The maturity of April 23-2015 bond instrument, worth N535.0bn, hit the system today providing further liquidity for the market ahead of trading in the coming week. Analysis of bond trading across tenors further shows that investors are still more disposed to trading the short to medium tenured bond instruments — indicating uncertainties around future interest rate expectation. Hence, the low appetite for long tenured bonds.
The yield curve generally moderated during the week in line with the recent trend that has been experienced particularly at the shorter end of the curve while it remained largely unchanged at the longer end. At the moment, the yield curve also remains normal at the short end while it sustained its inversion at the longer end of the curve.
The overall mood of the bond market (as in the case of equities) is calm as investors continue to spot investible opportunities within the space. Outlook on interest rate environment post-May 29 portends possible moderation and as such may indicate value for discerning investors. We perceive that the market movers are still staying on the side-line to watch the expected successful transition of government by May-2015 before returning fully to the market. Thus, we expect the market to still trade sideways in the coming week.

Source: Afrinvest (West Africa) Limited Research Team.