BY BAMIDELE FAMOOFO
Investors in Nigeria’s equities market have 13.4 percent returns on investment in their kitty as at April 22, 2022 as market performance continues to improve. Month-to-date return on investment stood at 3.2 percent, increasing investors’ fortune to 13.4 percent.
Bargain hunting was the overarching theme during the last trading week as investors flocked into bellwether stocks ahead of Q1-22 corporate earnings releases.
Notably, investors’ buying interest in GUINNESS (+17.5%), WAPCO (+10.6%), NB (+8.3%), INTBREW (+7.1%), AIRTELAFRI (+4.7%), SEPLAT (+4.6%), and FLOURMILL (+4.6%) supported market performance.
All-Share Index rose by 2.0 percent week on week (w/w) to close at 48,459.65 points. Consequently, the MTD and YTD return increased to +3.2% and +13.4%, respectively. However, activity levels were weaker than the prior week, as trading volumes and value declined by 7.1% w/w and 26.2% w/w, respectively. Across our sectoral coverage, the Oil and Gas (+6.4%), Consumer Goods (+3.3%), Industrial Goods (+1.7%), and Banking (+0.6%) indices closed positive, while the Insurance (-0.1%) index was the sole loser.
“This is the first time I’m hearing of it. If it is true, they should let us see the phone. it is when we see its specifications and workability that we will be able to know whether it will compete
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In the week ahead, it is expected that the NGX’s floor will be flooded with results as the Q1-22 earnings season commences in full swing. Thus, the local bourse is likely to close positive next week as we expect decent earnings releases across the board to temper selling activities by investors reluctant to leave gains in the market. Notwithstanding, we reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.
In the money market, overnight (OVN) rate dipped by 5.5ppts w/w to 5.7 percent, as the liquidity surfeit from the prior week coupled with additional inflows from OMO maturities (N23.95 billion) saturated the system and outweighed outflows for this week’s debits.
In the coming week, it is expected that the OVN rate will trend upward, as expected inflows from FGN bond coupons (NGN160.32 billion) are likely to be offset by funding pressures for next week’s auctions (NTB, OMO and FX).
Trading in the Treasury bills secondary market sustained last week’s bearish sentiment following the continued slowdown in demand for bills. Thus, the average yield across all instruments rose by 41bps to 3.8 percent. Across the market segments, the average yield expanded both at the OMO and NTB segments by 28bps to 4.0 percent and 43bps to 3.8 percent, respectively.
We anticipate a further increase in T-bills yields given the expected tight liquidity position. Also, the CBN is set to hold its bi-weekly NTB PMA with N5.86 billion worth of maturing bills on offer.
The Treasury bonds secondary market closed this week on a bearish note, as demand for FGN bonds remained low amid investors positioning for next week’s PMA. Consequently, the average yield increased 11bps w/w to 11.2 percent.
Across the benchmark curve, the average yield increased at the short (+25bps), mid (+12bps) and long (+5bps) ends, as investors took profit off the APR-2023 (+102bps), FEB-2028 (+40bps), and APR-2037 (+25bps) bonds, respectively.
Next week, we expect the outcome of the April 2022 FGN bond auction scheduled to hold on Monday (25th April) to influence the direction of yields in the secondary market. At the auction, the DMO is offering instruments worth N225.00 billion through a new issue of the FGN APR 2032 bond and re-openings of the 13.53 percent FGN MAR 2025 and 13.00 percent FGN JAN 2042 bonds. In the medium term, we maintain our view of an uptick in bond yields, as the FGN’s borrowing plan (Q2-22: N675.00 billion) points towards an elevated supply.
Nigeria’s FX reserves increased by USD59.99 million w/w to USD39.80 billion (20th April 2022). Meanwhile, the naira depreciated at the I&E window (IEW) by 0.2 percent to N418.33/USD but appreciated by 0.2 percent to N589/USD at the parallel market. At the IEW, total turnover (as of 21st April 2022) declined by 4.3 percent WTD to USD556.21 million, with trades consummated within the N410.00 – N453.15/USD band. In the Forwards market, the naira was flat at the 1-month (N418.11/USD) contract but appreciated at the 3-months (+0.1% to N423.46/USD), 6-months (+0.2% to N431.67/USD), and 1-year (+0.4% to NGN447.07/USD) contracts.
