Nigeria Market Watch: Week Ended 30th April, 2015

Weekly Equities Market Review and Outlook
The Nigerian Stock Market traded predominately in the red save for the last trading day this week erasing previous losses. The streams of positive quarterly results that were released gradually boosted investors’ sentiment most especially on Thursday (+1.9%). As a result, the NSE-ASI advanced 0.6% WTD settling at 34,708.11 points at the close of trade this week. Likewise MTD and YTD swung positive at 9.3% and 0.1% respectively. On the other hand, market activity was down W-o-W as the aggregate volume traded declined 43.4% W-o-W to 1.2bn units while aggregate value traded for the week shed 30.4% W-o-W to N12.0bn.
The Consumer Goods (+0.7%) and the Industrial Goods (+2.8%) sectors trended northwards respectively. On the contrary, the Banking, the Insurance and the Oil & Gas sectors all trended southwards, depreciating 1.7%, 2.3% and 6.9% in that order as sell pressure was sustained on key counters in the sectors during the week
Market breadth was negative, settling at 0.8x as 36 stocks advanced while 41 stocks declined. 105 stocks however closed flat. PRESCO (+14.6%), NPF MICRO FINANCE (+13.8%) and AG LEVENTIS (+11.8%) were the best performing stocks for the week, while UNITY BANK (-22.2%), DANGOTE SUGAR (-13.8%), MAY & BAKER (-12.8%) and ACCESS (-11.1%) were the market laggards. We expect the market sentiments to improve in the week ahead as investors react to some impressive Q1:2015 results posted at the close of the week.

Money Market Review and Outlook
Liquidity within the market surged during the week hence average money market rates for the week dropped to 8.3% for the Open Buy Back rate (OBB) and 9.0%for the overnight rate relative to previous week’s 15.1% and 16.2% respectively. This was driven by bonds maturity worth N535.0bn which hit the system.
Liquidity level further increased on Tuesday with an opening balance of N812.2bn while Standing Lending Facility (SLF) accessed from the CBN by the Deposit Money Banks (DMBs) closed at N91.0bn. As such the OBB and Overnight rates declined marginally to 8.0% and 8.8% respectively.
On Wednesday however, liquidity opening balance declined to N712.7bn, pushing money market rates higher to 8.6% (OBB) and 9.3% (Overnight). This decline in liquidity was as a result of OMO auctions during the week (Monday and Wednesday worth N268.0bn and N331.4bn apiece).
Amid net inflow of N93.4bn today from the OMO auction worth N258.0bn and OMO maturity of N351.4bn, the OBB and Overnight rates closed the week lower at 8.3% and 8.8% respectively. In the coming week, liquidity level is expected to increase slightly as T-bills worth N150.6bn and FAAC allocation for March are anticipated to hit the system.

Foreign Exchange Market Review and Outlook
Despite dollar auction sales worth US$91.2bn by international oil companies on Monday, the naira closed flat at N199.10/US$1.00 at the interbank market. This rate was maintained throughout the week. Similarly, the CBN’s clearing rate steadied at N197.00/US$1.00 for the week.
As a follow up to the CBN’s  withdrawal limit on overseas card holders to US$50,000 (from US$150,000) per annum and daily cash withdrawals to US$300, the Apex bank has further clarified that customers’ cards linked to domiciliary accounts overseas are not affected. Although we suspect that demand for the dollar by travelers may increase locally as a result of this decision, we expect exchange rate to continue to trade within the current level at the interbank segment of the forex market in the coming week.
However, at the BDC segment of the forex market, the naira depreciated by N3.00 or  1.3% WTD to N220.10/US$1.00 from N223.10/US$1.00

Bond Market Review and Outlook
Against the backdrop of the bullish sentiment which drove a rally in the fixed income space last week, the market took a breather this week. Hence average yield rose 17bps to 14.7%, even as investor sentiment varied along the term structure. Trading activities in the fixed income market however did not commence until Tuesday due to IT related malfunctions that prevented trading activities from taking place on Friday and Monday. Activities however picked up strongly on Tuesday after the suspension on trading was lifted with volume and value of T-bills and bonds instruments traded reached a 6-day high. Investors played more at the short to medium end of the curve while the JUL-2034 and JUL-2030 instruments majorly drove volume in longer term instruments.
The shorter term instruments which experienced significantly rally last week witnessed correction this week as dealers quoted higher yields. This was traceable to profit-taking and the aggressive OMO mop-ups (N847.2bn in total) conducted by the CBN this week to rein in the liquidity influx on OMO bills (N366.0bn) and FGN bonds (N535.0bn) maturities. OMO bills were allotted at relatively high yield of 14.0% for all tenors (vs 10.0%, 12.8% and 13.0% rates for the 91, 182 and 368 days tenor T-bills were allotted last week). This had a more telling impact on yields on shorter term debts, as all short term rates inched higher. In contrast to the bearish activities at the shorter end of the curve, dealers quoted lower yields for long tenured securities with the NOV-2028, MAY-2029 and NOV-2029 instruments witnessing a W-o-W decline in yields.
Despite the mixed sentiment along term structure, the sovereign yield curve majorly maintained its normality. However, a slight inversion at the longer end of the curve remained noticeable where the 20Y benchmark instrument traded at a slight discount to the 15 year benchmark bonds. We expect bargain hunting to take precedence in the FGN bonds market next week, especially across the short to mid-termed tenors. Liquidity in the money market is expected to improve on the back of liquidity injection from FAAC allocation and settlement of maturing treasury bills (N153.6bn). Our short to mid-term outlook for the market remains moderately bullish as we expect investors to further re-price financial assets based on lower political risk and the recent stability in the forex market.

Source: Afrinvest (West Africa) Limited Research Team.