BY BAMIDELE FAMOOFO
The bears continued to dictate proceedings in the local bourse as the market suffered its fourth consecutive weekly loss.
Precisely, the All-Share Index shed 0.5% to close at 46,631.46 points. Particularly, profit-taking activities witnessed in NASCON (-8.9%), WAPCO (-2.7%), FBNH (-3.3%) and DANGSUGAR (-1.9%) led the weekly loss.
Consequently, the month to date (MTD) and year to date (YTD) return for the index moderated to -0.7% and +9.2%, respectively. In terms of activity levels, trading volume and value declined by 12.8% w/w and 21.0% w/w, respectively.
Across sectors, the Oil and Gas (+3.1%) and Banking (+1.5%) indices advanced, while the Consumer Goods (-0.4%), Industrial Goods (-0.4%), and Insurance (-0.2%) indices declined.
With the moderation in the prices of bellwether stocks this week, market analysts expect savvy investors to take advantage of this and make re-entry ahead of Q1-22 earnings announcements. Considering that the 2021FY earnings season has run its course, it is expected that investors’ sentiment will be influenced by developments in the macroeconomic landscape and the movement of yields in the fixed income space.
Overall, investors are advised to take positions in only fundamentally sound stocks as the weak macro story remains a significant headwind for corporate earnings.
At the money market, the overnight (OVN) rate dipped by 4.42ppts w/w to 6.3%, as the system remained afloat with liquidity in the absence of any significant outflows from the system.
A further tightening in the system liquidity is expected in this week, as the outflows from CBN’s weekly auctions (NTB, OMO, and FX) will most likely offset expected inflows from OMO maturities (N50.00 billion). Hence, an expansion in the OVN rate from current levels is envisaged.
The Treasury bills secondary market maintained last week’s bearish sentiments following the sustained dearth in the demand for bills. Thus, the average yield across all instruments expanded by 5bps to 3.4%. Across the market segments, the average yield closed flat at 3.6% in the OMO segment but expanded by 6bps to 3.3% in the NTB segment.
This week, it is expected that the outcome of the NTB auction will shape the direction of yields in the T-bills market. The CBN is set to roll over N141.26 billion worth of maturities to market participants at the auction.
Similarly, the Treasury bonds secondary market traded with bearish sentiments, as the average yield expanded by 31bps w/w to 11.0%. Investors sold off various positions across the curve in anticipation of higher yields following the release of the Q2-22 FGN bonds issuance calendar.
For clarity, the DMO intends to raise c. NGN675.00 billion in Q2-22 – 50.0% increase from the NGN450.00 billion offered in Q1-22 – through reopening of the MAR-2025 and JAN-2042 bonds, and a new issue ten-year instrument (APR-2032). Consequently, we observed profit-taking across the short (+6bps), mid (+47bps), and long (+32bps) segments of the benchmark curve, following sell-offs of the MAR-2027 (+44bps), JUL-2030 (+62bps), and JUL-2034 (+63bps) bonds, respectively.
“We highlight that the increased FGN borrowing plan based on the Q2-22 bond calendar lends credence to our view of an elevated supply, in the face of thin liquidity. Thus, we reiterate our view of an uptick in bond yields in the medium term,” experts at Cordros said in their weekly market performance review report.
Last week, Nigeria’s FX reserves increased by USD84.25 million w/w to USD39.63 billion (6th April 2022). Meanwhile, the naira was flat at N416.67/USD at the I&E window (IEW) but appreciated by 0.2% to N587.00/USD at the parallel market. At the IEW, total turnover (as of 7th April 2022) declined by 23.1% WTD to USD528.14 million, with trades consummated within the N410.00 – N453.15/USD band. In the Forwards market, the naira appreciated at the 1-month (+0.1% to N418.00/USD) and 6-months (+0.1% to N432.61/USD) contracts but was flat at the 3-months (N424.02/USD) and 1-year (N448.85/USD) contracts.
