Investors scramble for safety as turnover drops by N4.23trn on FMDQ Exchange in August

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BY BAMIDELE FAMOOFO

Uba Group

Investors in the Fixed Income and Currency market reduced their risk appetite by N4.23 trillion as total turnover on the FMDQ Exchange dropped to N15.53 trillion in August.

On a month-on-month basis, turnover dipped by 21.4 percent but it grew by 26 percent or N3.2 trillion year-on-year.

Money Market, CBN Bills1 and FX Markets transactions dominated secondary market activity in August 2022, accounting for 88.38 percent of the total secondary market turnover.

Total spot market turnover for all products traded in the secondary market was N13.46trn in August 2022, representing a MoM decrease of 23.22 percent (N4.07trn) from July 2022 figures.

The MoM decrease in spot market activity was driven by the 47.67 percent (N3.91trn) and 20.81 percent (N0.66trn) decrease in MM and FX transactions, respectively, despite the 8.11 percent (N0.50trn) increase in fixed income (FI) transactions in August 2022.

The decrease in MM turnover was driven by a decrease in Repo/Buy-Back transactions, while the increase in FI turnover was jointly driven by MoM increases in T.bills and OMO Bills turnover, offsetting the decline in the turnover figures for other FI products.

FX market turnover was N2.50trn ($5.82bn) in August 2022, representing a MoM decrease of 20.81 percent (N0.66trn) from the turnover recorded in July 2022 (N3.16trn).

In the FX Market, the Naira depreciated against the US Dollar, with the exchange rate ($/N) increasing by 0.55 percent ($/N2.35) to close at an average of $/N429.80 in August 2022 from $/N427.45 recorded in July 2022.

Further, exchange rate volatility decreased in August 2022 compared to July 2022 as the Naira traded within an exchange rate range of $/N428.13 – $/N431.00 in August 2022 compared to $/N424.17 – $/N431.00 recorded in July 2022.

“Total spot market turnover for all products traded in the secondary market was N13.46trn in August 2022, representing a MoM decrease of 23.22 percent (N4.07trn) from July 2022 figures”

Fixed income market turnover was N6.66trn in August 2022, representing a MoM increase of 8.11 percent (N0.50trn) from the turnover recorded in July 2022 (N6.16trn).

The MoM increase in the FI market turnover was driven by the increase in T.bills and OMO Bills, offsetting the combined MoM decrease of N0.96trn in turnover for CBN Special Bills, FGN Bonds and Other Bonds. As a result, the trading intensity (TI) for T.bills and OMO Bills for August 2022 increased MoM by 0.05 and 2.15 points to 0.29 and 4.36 respectively, while TI for FGN Bonds decreased marginally.

At the primary market, the Debt Management Office sold T.bills valued at N446.15bn across its fully subscribed auctions in August 2022, representing a 9.47 percent (N38.60bn) MoM increase on the value of T- bills sold across its auctions in July 2022 (N407.55bn).

Similarly, the DMO sold FGN Bonds worth N200.58bn (less than the total amount of FGN Bonds offered by N24.42bn) via two (2) 10Y and one (1) 20Y re-openings in August 2022.

However, this represents a 61.97 percent (N76.74bn) MoM increase relative to July 2022 (N123.84bn) for the same FGN Bond issues. However, for the second consecutive month, the CBN did not auction OMO Bills in August 2022.

At the non-sovereign securities market, total value of corporate bonds listed on FMDQ Exchange in August 2022 was N27.28bn representing a 76.48 percent (N88.72bn) MoM decrease from the value of corporate bonds listed in July 2022. Corporate bond listings emanated solely from two (2) issuers in the Infrastructure and Information & Communication Technology sectors.

As a result, the total outstanding value for corporate bonds increased MoM by 2.35% (N27.09bn) to N1,180.59bn. Similarly, the total value of CPs quoted on FMDQ Exchange in August 2022 was N29.05bn, representing a MoM increase of 37.28 percent (N7.89bn) from the value of CPs quoted in July 2022.

Quoted CPs were issued by institutions from various sectors including Financial Services (3), Agriculture (2), Real Estate (4), Health & Pharma (1), Commodities Trading (1) and Logistics (1). In August 2022, CPs with a total value of N58.74bn matured and were redeemed resulting in a MoM decrease of CPs outstanding by 5.66 percent (N29.69bn) to N494.89bn.

“CBN"