Downbeat performance drags NGX by 8bps amid window-dressing, portfolio reshuffling

  • FGN bond stop rate falls for most maturities offered


Uba Group

Portfolio rebalancing activities continued for another week in the face of the first quarter window dressing actions by traders and the ranging trend on the local bourse in expectations for more corporate earnings inflow and dividend declarations. This comes as investors continue to digest the outcome of the MPC meeting earlier in the week and its probable impact on the economy and markets.

The NGX-ASI posted a lackluster performance by 0.08 percent week on week to 54,892.53 points due to position taking in some defensive stocks with strong fundamentals. In the same manner, the market capitalization shed 0.08 percent week on week to N29.90 trillion as it wiped N23.24 billion in losses from investors’ pockets while the yearto-date return tanked to 7.11 percent from 8.87 percent the preceding week.

Across the sectors last week, performance was largely on a bearish trend across the indices under the purview except for the Banking sector which gained 0.93 percent week on week from positive price appreciations; and the Oil/Gas index which closed flat from last week’s close. On the contrary, the Consumer Goods, Insurance and Industrial Goods sectors were in the bear zone to close the week by -1.01 percent, -0.53 percent and -0.49 percent from the previous week.

At the close of the week, the level of market trading activities was positive as it saw the total number of deals decrease by 24.40 percent week on week to 14,019 as stockbrokers recorded a 97.85 percent surge in traded volumes for the week to 1.69 billion units valued at N11.07 billion, indicating a massive rise of 607.15 percent week on week. Meanwhile, the top-gaining securities for the week were NPFMCRBK (+7%), GEREGU (+6%), and TRANSCOHOT (+6%), while the week’s losers were UCAP (-17%), LINKASSURE (-11%), and ETI (-10%).

Notwithstanding the ongoing extreme volatility in the equities market, stakeholders expect growth in dividends of some dividend –paying stocks and the increasing dividend yields to drive investors’ sentiments in the coming weeks.

However, investors are advised to trade in companies with sound fundamentals and, as such, should take advantage of price corrections in line with domestic and global trends. Similarly, the Debt Management Office offered and allotted, respectively, N360 billion (90 apiece) and N563.36 billion worth of bonds across 13.98 percent FGN FEB 2028, 12.50% FGN APR 2032, 16.25% FGN APR 2037, and 14.80% FGN APR 2049 re-openings in the bond market. The marginal rates for the 32s, 37s, and 49s contracted to 14.75 percent (from 14.90%), 15.20 percent (from 15.90%), and 15.75 percent (from 16.00%), respectively, while the marginal rate for the 28s expanded to 14.00% (from 13.99%).

Notably, the bid-to-cover ratios for the 37s (3.95x) and 49s (3.88x) were significantly higher than those for the 28s (0.81x) and 32s (0.34x), indicating stronger demand for the longer-term bonds. Overall, demand increased compared to the last auction, as implied by the 1.43x bid-to-cover ratio (from 1.29x), notwithstanding a decrease in allotments and subscriptions. Despite the lower stop rates, the values of FGN bonds traded on the secondary market moderated as yields increased for most maturities tracked.

Specifically, the 10-year 16.29% FGN MAR 2027 and the 30-year 12.98% FGN MAR 2050 notes fell by N0.24 and N0.83, respectively; their corresponding yields expanded to 12.1% (from 12.45%) and 15.15% (from 15.00%), respectively. On the other hand, the yield on the 15-year 12.50% FGN MAR 2035 remained unchanged at 14.69%, while the 20-year 16.25% FGN APR 2037 increased by N3.44 as its corresponding yield contracted to 14.83% (from 15.40%).

Meanwhile, the value of FGN Eurobonds traded on the international capital market appreciated for all maturities tracked due to renewed bullish sentiment. Specifically, the 10-year 6.38% JUL 12 2023, the 20-year 7.69% FEB 23 2038, and the 30- year 7.62% NOV 28 2047 gained USD 0.18, USD 0.36, and USD 0.03, while their corresponding yields decreased to 14.26% (from 14.41%), 13.64% (from 13.72%), and 13.20% (from 13.21%), respectively.

In this new week, financial experts expect local OTC bond prices to rise (and yields to decrease) as prospective investors demand lower rates in tandem with rates in the primary market.