Daily Market Wrap

Friday, July 24, 2020

By FSDH Research

Market Insight- The Nigerian equities market reversed its direction and closed in the red today. Both, the All-Share Index and the NSE-30 Index traded lower with All-Share Index (ASI) YTD return settling at -8.99 percent. Major sector indices showed a divergence. The Oil & Gas (-4.98 percent) and Industrial (-1.01 percent) sectors were major losers followed by Consumer goods sector, which ended with losses of 0.08 percent. On the other hand, the Insurance (+0.29 percent) sector closed in the green along with marginal gains in the Banking sector (0.01 percent). The markets may remain volatile in the near term. We advise investors to accumulate quality stocks at lower levels with a long term investment horizon.

Market Brief

  • The Nigerian equity market closed on a negative note today, as All Share Index decreased by 0.34 percent to close at 24,427.73 points.
  • The market cap of equities listed on the NSE declined to ₦12.743 trillion from ₦12.787 trillion
  • Market breadth was positive with 17 gainers as against 13 losers.

NSE 30

  • The NSE 30 Index decreased by 0.29 percent
  • Custodian Investment Plc and Julius Berger were the key gainers, while Seplat Petroleum and Unilever Nigeria were the key losers.

Money Markets

  1. The Overnight (O/N) rate declined by 0.18 percent to close at 2.20 percent
  2. The Open Buy Back (OBB) rate also declined by 0.28 percent

The I&E FX market continued to trade lower to tight liquidity conditions. Naira weakened by 0.39 percent as the dollar was quoted at ₦389.50 as compared to ₦388.00 on the previous day. Most participants maintained bids between ₦386.00 and ₦390.99 per dollar.

Treasury Bills

In the NT-bills market, average yield across the curve remained unchanged at 1.75 percent. Average yields across the short-term and medium-term maturities compressed by 1 basis point each due to the maximum buying interest witnessed in the NTB 27-Aug-20 (-3 bps) maturity bill. However, the average yield across long-term maturities remained unchanged.

The OMO bills market closed on a positive note with average yield across the curve declining by 34 bps to close at 4.64 percent

Bond Markets

The FGN bond market closed on a positive note today, as the average bond yield across the curve cleared lower by 11 bps to close at 4.21 percent from 4.32 percent on the previous day. Buying interest was witnessed across short, medium, and long tenor of the curve with average yields declining by 1 basis point, 53 bps, and 28 bps, respectively.

The DMO has a domestic funding target of ₦1.59 trillion for 2020. Till now, the DMO has raised ₦1.49 trillion from FGN bond sales (including receipts from non-competitive bids) in the last seven months. Against these gross auction proceeds, the DMO has made repayment of maturities worth ₦600 billion. The DMO has been able to reduce the FGN’s borrowing costs with a successful bond auction in July as compared to June auction. However, there could be some retracement in yields as investors might get discouraged due to lower returns. Considering all seven month’s bond auction performances, we believe that the DMO is likely to easily achieve its target for 2020 and could build an additional cushion.

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