NIGERIA | Daily Market Wrap | 01-Mar-2018 | Elixir Research


01 Mar NIGERIA | Daily Market Wrap | 01-Mar-2018 | Elixir Research

Market Wrap | Capital inflow doubles in 2017; Equities reverse gains as FGN debt market turns mixed


MTN roadshow/book building set for May/June 



Following plans to list its shares (estimated at $5.23 billion) on the Nigerian bourse come July 2018, MTN Nigeria has further disclosed plans to embark on a roadshow between May and June. MTN intends to split its 402 million ordinary shares (currently trading at $13) into 50 units each, taking its total shares outstanding to 20.10 billion shares. The price is to be set via a book building process. According to the company, proceeds of the issue are to redeem its debt (in the form of preference shares) and reduce its currency exposure. The prospect of MTN Nigeria listing on the exchange is clearly a welcomed positive. This would deepen the market, both in terms of sector diversity, size and transaction and provide more investment windows. It also would help the market to be a fairer representation of the broader economy.



FGN debt market mixed though with a bullish tint



  • The banking system balance further improved to ₦519.17 billion from ₦412.59 billion while the standing lending window (SLF) balance was unchanged at ₦31.28 billion. The overnight rate and OBB trimmed by 1.08 and 0.67 percent points to 3.42% and 3.08% respectively off the back of improved system liquidity. Meanwhile, the CBN conducted an OMO auction today, offering ₦300 billion of the 259DTM but sold ₦276.82 billion at 14.40% (effective yield: 16.04%). 
  • The FGN debt market was mixed today, though with a bullish tint as traders price in further yield contraction, taking a que from yesterday’s auction which the CBN cut-off at lower stop rates. Despite the buying interest at the T-bill space, the average yield closed flat at 15.12% (on average), due to the sell-off on some maturities. The longend of the bond market was quiet while demand was strong at the short-end, resulting in a 3 basis points yield contraction to average 13.87% on the day. At the last T-Bill Primary Market Auction, the CBN offered and sold ₦130 billion across the 91DTM, 182DTM and 364DTM bills at respective stop rates of 11.85%, 13.50% and 13.50% (effective yields: 12.21%, 14.47% and 15.60%). 
  • According to the National Bureau of Statistics, capital inflows in Q4’17 was $5.32 billion compared to $4.14 billion in Q3’17 and $1.54 billion in Q4’16. While portfolio investment accounted for 64%, (Other investments 28% and FDI 7%), FDI rose faster by 221% in Q4’17 over Q3’17. Portfolio investment was up 25% and other investment rose by 21% in the same period. For 2017, capital inflow rose to $12.2 billion from $5.38 billion in 2016.
  • At the next session, we anticipate a downward adjustment of yields across the T-bills market, with a sharper adjustment at the long end of the space. Meanwhile, we expect another quiet session in the bond market amidst a scarcity of market catalysts.



Naira depreciates at I&E window



  • The Naira depreciated further by 0.03% against the Dollar at the IEW to ₦360.51/$ while it was flat at the parallel market to ₦363/$ respectively. At the CBN window, the local currency advanced by 0.02% to close at ₦305.85/$. 
  • Transaction volume at the IEW topped $427 million, higher than $204.32 million traded at the previous session on Tuesday.



Equities reverse gains to open March trading in the red



  • Nigerian stocks reversed the whopping 2.44% gain from the last session following the recoil in the industrial sector. This marks a negative start to trading in the month of March. The benchmark index lost -1.12% to close at 42,843.38 points, shrinking the year-to-date return to 12.03%.
  • Sector performance was mostly red. The industrial index shed -2.20% following the selloff in WAPCO (-3.47%) and DANGCEM (-1.82%). The banking index closed lower by 1.14%, on the back of the losses in FIDELITYBK (-4.35%), ETI (-3.19%), GUARANTY (-2.04%) and ZENITHBANK (-1.25%). The consumer goods index lost -0.74%, largely driven by NB (-3.61%) and HONYFLOUR (-1.79%). The oil & gas index added +0.97% due to the gains in SEPLAT (+2.20%) and MOBIL (+0.05%). The insurance index was up 0.14%. 
  • Market breadth index turned negative as the trading session recorded 31 losers and 29 gainers. TRANSCORP topped activity chart by volume, accounting for 10.87% of the market while GUARANTY, ZENITHBANK and NB accounted for 62.78% of market value. 
  • In the absence of any catalyst, we expect the market to remain volatile in the near term as investors anticipate the full swing of 2017 earnings season.



Corporate News:



  • Seplat Petroleum Development Company Plc announced the launch of a 5 or 7-year U.S. dollar denominated notes offering, to be issued by the Company and guaranteed by certain of its subsidiaries. The proceeds of the Notes will be used to refinance existing indebtedness and for general corporate purposes. 
  • Unilever Nigeria Plc has given notice of its closed period from February 28 to April 1, 2018 or 24 hours after the filing of the FY’18 result.