Foreign Investors Show Renewed Confidence on Nigeria’s Debt Security Instrument
Global Stocks Advance, Amid Federal Reserve Maintains Hawkish Stance
This week, positive sentiments dominated nine (9) out of the fourteen global market indices under our coverage, while the remaining five (5) indices declined. This performance was due to important monetary policies made at the recent policymakers’ meetings and continued concerns over the Delta variants of the Coronavirus pandemic.
The U.S Federal Reserve during her Federal Open Market Committee (FOMC) on Wednesday held the benchmark interest rate near zero (0.25%) but indicated that interest rate hike could be coming up sooner than expected and could likely begin reducing its monthly bond purchases of $120 billion as soon as November. During the meeting, the committee also forecasted a decrease in the growth outlook and higher inflation expectations for the year.
Similarly, the Bank of England (BOE) kept monetary policy unchanged at 0.10% and downgraded economic growth projection for the third quarter of 2021 from 2.9% to 2.1%. Also, policymakers at the BOE opted to stick to its asset purchase target of 875 billion euros ($1,2 trillion).
Consequently, all the major U.S indices under our coverage, DJIA Index, Nasdaq Composite Index, and S&P 500 Index increased by 0.62%w/w, 0.02%w/w, and 0.51%w/w respectively.
Similarly, all the major indices under our coverage in Europe; the France CAC 40, UK FTSE 100, and the German DAX Index increased by 1.04%w/w, 1.26%w/w, and 0.27%w/w respectively.
However, all the major indices under our coverage in Asia, the Japan Nikkie 225, Hong kong HANG SENG, China Shanghai Composite declined by 0.82%w/w, 2.92%w/w, 0.02%w/w respectively except India S&P BSE Index that grew by 1.75%w/w. As Evergrande, the second largest Chinese real estate developer failed to make its interest payment obligation of $83 million due on Thursday (23/09/2021) to investors.
Furthermore, the major indices in the emerging markets under our coverage, South Africa FTSE/JSE, and Brazil Bovespa Index increased by 1.89%w/w, 1.65%w/w while EGX 30, and Argentina Merval Index declined 3.23% w/w, and 5.52% w/w respectively.
In the coming week, we expect investors to react to the recent monetary policymakers meeting outcome and projections, as market participants continue to assess the economic environment and Delta Variant effect.
Local Bourse Extends Positive Sentiment, Gains 0.05%w/w
Transactions on the Nigerian Bourse ended w/w on a green note to extend the previous week’s positive sentiment, as the NGX-ASI appreciated by 0.05% from 38,943.87 points to close at 38,962.28 points. Positive market performances were recorded in two of the five trading sessions.
Investors gained about N10 billion, as the Market Capitalisation grew from N20.29 trillion in the previous week to N20.30 trillion.
At the end of the week, Insurance Index emerged as the best performer with (+1.75%), followed by Oil&Gas Index (+1.38%), and Industrial Goods Index (+0.23%) while negative performances dominated the remaining indices namely: Banking Index (-0.43%), and Consumer Goods Index (-0.04%).
PHARMA-DEKO PLC emerged as the best performing stock for the week with a w/w gain of +32.10%, while SCOA emerged as the worst-performing stock with a w/w loss of -15.13%.
A total of 1.29 billion shares worth N13.92 billion in 16,745 deals were traded this week by investors, as against a total of 856.29 million shares worth N10.75 billion in 15,663 deals last week.
Twenty-eight (28) equities appreciated at price during the week, higher than Twenty-one (21) equities in the previous week. Twenty-three (23) equities depreciated in price, lower than Thirty-eight (38) equities in the previous week, while one hundred and four (104) equities remained unchanged, as against ninety-six (96) equities recorded in the previous week.
This week, we expect positive sentiment, as expectation increases towards the compilation of the Q3 financial report. Furthermore, investors will also track yield movement in the fixed income market.
NASD Market rebounds by 0.95%w/w, as Investors Gain 6.07 Billion
Transactions on the NASD OTC Security Exchange Market halt the bearish sentiment of three consecutive weeks, as the NASD Security Index NSI advanced by 0.95%, representing basis points to close at 742.70 points against 735.72 points in the previous week. Investors gained N6.07 billion for the week, as the NASD OTC Market Capitalisation closed at N645.54 billion for the week.
Total trading activity for the week was valued at N617.14 million in 186 deals, against N237.01 million in 165 deals recorded in the previous week. The most traded stocks on the exchange for the week are; SDNGXGROUP, SDCSCSPLC, SDFCWAMCO, SDNDEP, SDNASDPLC, SD11PLC, SDAIRLIQ, SDVFDGROUP, and SDAFRILAND.
SDNASDPLC emerged top gainer for the week for the second consecutive time, with a maximum price appreciation of (+55.00% to N11.11), while SDNMRCPLC emerged top loser for the week with a price depreciation of (-9.97% to N5.24).
This week’s price appreciation resulted from investors’ buy-sentiment in medium and large capitalized stocks among which are; SDNASDPLC (+55.00% to N11.11), SDNDEP (+5.88% to N270), SDSDCSCSPLC (5.82% to N17.99), and SDNGXGROUP (+4.05% to N13.36).
Consequently, the market breadth close positively, recording 4 gainers and 3 losers.
We expect the NASD OTC Market to trade in a tight range in the coming week.
Marginal Bearish Performance on NT-Bills
Activities on Treasury Bills this week were limited to the secondary market as no new instruments were offered and traded on a quiet note due to the activities on the primary bond market.
Furthermore, the average yield of the Treasury Bills closed on a bearish sentiment to 5.61%, as against 5.57% recorded last week, representing a 4bps increase.
Similarly, the average yield on the secondary Open Market Operation (OMO) closed to settle at 6.43%, representing a 9bps increase.
In the coming week, we expect the secondary money market to trade in a tight range and the apex bank (CBN) to roll over the matured Treasury Bill instruments by offering new bills. Looking at the trend from the previous NTB auctions, we expect the investors’ appetite to be titled towards the longer end of the curve.
This week, the Debt Management Office (DMO) on behalf of the Federal Government of Nigeria (FGN) held an FGN Bond auction by offering N150bn across 2028, 2036, and 2050 maturities.
At the FGN Bond Auction, the DMO offers of N50bn(2028), N50bn(2036), and N50bn(2050), was met with a subscription of N52.43bn, N125.58bn, and N156.21bn respectively, out of which the DMO allotted N42.37bn(2028), N115.85bn(2036), and N118.83bn(2050) bringing the total amount allotted to N277.05bn. As expected, investors’ appetite was titled towards the longer end of the curve, as the bid-to-offer ratio for the 2050-maturity was 3.13x, while the 2028 and 2036 paper posted a bid-to-offer ratio of 1.05x and 2.51x respectively.
stop rates for the 2028 and 2036 papers were allocated at 11.60% and 12.75% respectively. However, the rate on the 2050 paper was allocated at 13.00%, 20bps higher than the marginal rate at the previous bond auction.
Also, the DMO disclosed in a statement on Tuesday that Nigeria has raised a sum of US$4bn through Eurobonds. The book order peaked US$12.2bn which enabled the FGN to raise US$1bn more than US$3bn it initially announced. The Eurobonds were issued in three tranches which were seven-year at 6.125% P.A, twelve-year at 7.375% P.A, thirty-year at 8.25% P.A. This signifies renewed confidence from foreign investors in Nigeria debt security instrument.
Consequently, the average yield on the bond traded on the FMDQ market closed on a bullish sentiment to 8.52%, as against 8.61% recorded last week, representing a decrease of 9bps.
We expect the bond market to trade in a tight range in the absence of any maturing instruments
System liquidity indicators closed lower, as Overnight (O/N) and Open Buy Back (OBB) fell to 17.25% and 16.00% respectively, from 17.75% and 16.50% in the previous week.
Foreign Exchange Market
At the I&E FX window, the Naira depreciated by 0.49%(w/w) to close on Friday (24/09/2021) at ₦414.90/USD against ₦412.88/USD from last Friday’s position.
The Foreign Reserve grew by $722.57 billion to the level of $36.09 million (23/09/2021) from $35.37 billion (16/09/2021).
The Brent Crude and WTI Crude appreciated by $3.53/barrel (w/w) and $2.16/barrel (w/w) to $78.09/barrel and $73.98/barrel this Friday(24/09/2021) as against $74.56/barrel and $71.82/barrel last Friday (17/09/2021), representing an increase of 4.73% (w/w) and 3.01% (w/w). Similarly, Nigeria’s Bonny Light also increased by $2.88 to $76.38/barrel on Friday(24/09/2021) from $73.50/barrel (10/09/2021), representing a rise of 3.92% (w/w)
Source: GTI Research