Year-to–date returns hit 19.2%
BY BAMIDELE FAMOOFO
Despite the shortened trading session, the bullish momentum in the local bourse gained steam as sustained bargain hunting activities in blue-chip stocks pushed the All-Share Index above the 50,000 psychological mark to close at 50,937.01 points – the highest level since March 2008.
Interestingly, the market traded positively in all three trading sessions. Pertinently, investors’ demand for bellwethers — PRESCO (+18.6%), GUINNESS (+18.3%), NB (+22.7%), OKOMUOIL (+15.7%), BUACEMENT (+8.2%) and MTNN (+6.1%) drove the benchmark Index 2.6 percent higher.
Consequently, the MTD and YTD returns increased to +2.6% and +19.2%, respectively. However, activity levels were weaker than in the prior week as volume and value traded decreased by 24.6 percent w/w and 16.9 percent w/w, respectively.
Sectoral performance was broadly positive, as the Consumer Goods (+7.3%), Industrial Goods (+3.2%), and Banking (+0.6%) indices advanced, while the Insurance (-2.0%) and Oil and Gas (-1.1%) indices closed in the red.
Given that the Q1-22 earnings season has run its course and the upward reprising of cyclical stocks that ensued, Stock Analysts expect a subdued market performance in the week ahead.
“The bears will likely dominate market performance, as investors cash out on the gains across bellwether stocks over the past two weeks.”
Notwithstanding, they advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.
The overnight (OVN) rate ended the week lower at the money market, as it crashed by 7.58ppts w/w to 4.9 percent.
The contraction was supported by inflows from FAAC allocations (N448.46 billion) and OMO maturities (N20.00 billion) which subdued outflows for CBN’s weekly OMO and FX auctions.
This week, it is expected that the OVN rate will trend upwards, as the N40.00 billion expected from OMO maturities may not be sufficient to offset the outflows from CBN’s auctions (NTB, OMO and FX).
Just as Cordros Research envisaged, activities in the Treasury bills secondary market were bullish in the review week, as the buoyant system liquidity drove demand for bills as the average yield across all instruments contracted by 3bps to 3.8 percent.
Across the segments, the average yield contracted by 12bps to 4.1% at the OMO, while the NTB average yield was flat at 3.7 percent. Notably, the CBN held an OMO PMA on Thursday after a 5-week hiatus. At the OMO auction, the CBN offered and allotted NGN50.00 billion worth of OMO bills to participants and maintained stop rates across the three tenors – 110DTM: 7.0 percent, 187DTM: 5.8 percent and 362DTM: 10.1 percent – as with prior auctions.
It is expected that yield in the T-bills market will trend upwards this week, with system liquidity expected to be tight in the coming week. At the NTB segment, we believe the outcome of the NTB auction scheduled for mid-week will shape sentiments. At the auction, the CBN will roll over N127.47 billion worth of instruments to market participants.
Trading in the Treasury bonds secondary market was broadly bearish last week, as demand for FGN bonds remained tepid. We believe this is reflective of expectations regarding higher yields in the near term. Consequently, the average yield expanded by 12bps to 11.3 percent. Across the benchmark curve, the average yield expanded at the short (+4bps), mid (+24bps), and long (+3bps) ends as investors took profit off the MAR-2027 (+28bps), FEB-2028 (+30bps), and MAR-2036 (+10bps) bonds, respectively.
“In the medium term, we maintain our expectation of an uptick in yields in the bonds market, as both the FGN’s borrowing plan for 2022FY and expected fiscal deficit point towards an elevated supply,” Cordros said.
In the review week, Nigeria’s FX reserves decreased by USD152.55 million w/w to USD39.43 billion (May 4, 2022).
However, the naira appreciated by 0.5 percent to N417.00/USD at the I&E window (IEW) and by 0.2 percent to N589.00/USD at the parallel market. At the IEW, total turnover (as of 05 May 2022) decreased by 57.1 percent WTD to USD379.18 million, with trades consummated within the N410.00 – N453.15/USD band.
In the Forwards market, the naira was flat at the 1-month (N418.43/USD) contract, but depreciated at the 3-months (-0.1% to N424.11/USD), 6-months (-0.1% to N432.79/USD) and 1-year (-0.2% to NGN449.55USD) contracts.