29 Jun NIGERIA | Weekly Wrap-Up | 29-Jun-2018 | Elixir Research
Posted at 20:03h in Weekly Wrap-up
Weekly Wrap-Up | Yields contract despite drop in liquidity as Stocks finish June slightly positive
Fixed Income yields contract despite drop in system liquidity
- At week start, the CBN conducted an OMO auction, offering ₦250 billion and selling ₦207 billion across the 87DTM and 213DTM bills at respective stop rates of 11.05% and 12.15% (effective yields: 11.35% and 13.08%). That said, a ₦183 billion inflow from matured OMOs lifted liquidity conditions mid-week. Despite the inflow, interbank overnight and OBB rates rose by 10.50 and 10.34 percentage points (w/w) to 14.08% and 13.17% respectively for the week, owing to the sharp contraction in system liquidity. Banking system liquidity fell sharply to ₦131.65 billion from ₦714.45 billion a week ago, while the balance on the standing lending window (SLF) increased to ₦42.12 billion from ₦34.25 billion.
- On Wednesday, the Debt Management Office (DMO) conducted a primary market bond auction (PMA) yesterday offering ₦60 billion and selling ₦31 billion across the 5-yr, 7- yr and 10-yr bonds at respective stop rates of 13.50%, 13.80% and 13.81%. Meanwhile trading activities ended on a positive note at the secondary market despite the sell-offs mid-week following the increase in the PMA rates. Consequently, the average T-Bill yield fell by 5 basis points w/w to 12.97% just as the bond end of the market saw yield compressing by 9 basis point w/w to 13.14% on average.
- With the drop in system liquidity (₦132 billion), we look forward to a mixed trading pattern in the week ahead.
Naira weak on the IEW, flat at the parallel market
- The CBN sold $210 million to the different segment of the market this week.
- The Nigerian currency weakened on the investor & exporter window (IEW) by 0.09% against the Dollar to ₦361.32/$ while it marginally appreciated on the CBN official window by 0.02% to ₦305.75/$. Meanwhile, it closed flat at ₦362/$ on the parallel market.
- Volume activity moderated on the I&E window to $1.11 billion from $1.25 billion traded in the prior week (though a 4-day week). The outlook for the Naira remains positive, backed by value accretion to the external reserve and strong crude oil price.
June trading ends slightly positive, up 0.46% vs. -7.67% in May
- Despite the bearish dominance most of the trading week (excluding Monday which delivered a 0.34% gain), stocks bounced higher on Friday by 1.44% to see the benchmark index close at 38,278.55 points, gaining 1.10% for the week. The year-to-date return stood at 0.09%. The late recovery on Friday was supported by the rebound in DANGCEM (+1.78%), GUARANTY (+1.12%) and ZENITHBANK (+0.40%). The market ended the June trading month on a relatively positive note with a 0.46% gain compared with 7.67% loss in May.
- Market performance was mixed across the key sectors. The consumer goods index gained +1.88% w/w (+2.83% d/d), following the interest in HONYFLOUR (+9.57% w/w) and NESTLE (+5.35% w/w). The insurance index was rose by +1.72% w/w (-0.30% d/d), following the gains in LAWUNION (+9.30% w/w) and LASACO (+5.88% w/w). The industrial index added +0.68% w/w (-0.43% d/d), pushed higher by WAPCO (+5% w/w) and DANGCEM (+1.78% w/w). The oil & gas index plunged by -2.33% w/w (+0.65% d/d), on the back of losses from JAPAULOIL (-23.40% w/w), SEPLAT (-5.11% w/w) and FO (-3.52% w/w). The banking index lost -0.45% w/w (+0.54% d/d), depressed by DIAMONDBNK (-6.54% w/w), ZENITHBANK (-3.47% w/w), and ETI (-0.99% w/w).
- Amidst increased market activity (value and volume for the week rose by 82.6% and 397% respectively), market sentiment remains relatively fragile in the absence of any clear catalyst. We expect the mixed trend to persist in the new trading week though we see a positive start at week open.
- The Board of Directors of Cement Company of Northern Nigeria Plc (CCNN), and Kalambaina Cement Company Limited (KCCL) announced an agreed merger of their businesses, with CCNN as the resultant entity, subject to required regulatory and shareholders’ approvals.
- Dangote Cement Plc has announced the proposed issuance of a Commercial Paper (CP) to raise capital of up to ₦150 billion, either as a standalone transaction or by way of a programme to be released in tranches, series or proportions. The programme is to be listed on the FMDQ.
- The Board of Directors of Stanbic IBTC Holdings Plc, announced the audit of their Half-Year Financial Results for the half year ended June 2018, which will be presented to the Central Bank of Nigeria for approval, following which, the financial statements will then be released to the Market no later than 29 August 2018.
- The Board of Directors of Capital Oil Plc, announced the holding of an Extraordinary General Meeting of the shareholders, to discuss the sale of six billion un-allotted shares to willing and interested investors to be held at Dover Hotel, Ikeja, Lagos on July 26 2018 at 10 AM.
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