Weekly Market Report -Week Ended Dec. 04, 2015

Daily Equities Market Review and Outlook
The Nigeria equities market remained bullish on the back of appreciation in bellwethers such as DANGOTE CEMENT (+0.7%), NESTLE (+2.2%) and ETI (+3.3%). The All Share Index rose 0.3% to 27,631.05pts at the close of trade. Market capitalization rose N24.7bn to N9.5tn. Market activities declined as value dipped 45.0% to N1.7bn and volume reduced by 54.9% to 112.3m units.

The Industrial Goods index added 1.0%, driven by the rise in DANGOTE CEMENT (+0.7%) and WAPCO (+1.5%). The Banking index rose 0.3% as ETI (+3.3%), DIAMOND (+2.2%) and GUARANTY (+0.1%) recorded price appreciation. The Oil & Gas and Insurance indices increased 0.1% and 0.2% respectively. On the contrary, the Consumer Goods index declined 5bps today on account of bearish sentiment on UNILEVER (-4.9%) and NIGERIAN BREWERIES (-0.8%).

Market breadth decline to 1.0x (from 1.2x the previous session) as number of gainers and losers was equally at 20. Leading the advancers were OKOMU OIL (+10.2%), CCNN (+5.0%) and PORTPAINT (+5.0%) while UNITY BANK (-8.6%), WEMA BANK (-5.3%) and ETERNA (-5.0%) led the losers.

Weekly Equities Market Review and Outlook
The All Share Index (ASI) closed 5bps higher W-o-W while YTD loss closed at -20.3%. Market capitalization lost N4.7bn this week to close at N9.5tn. Aggregate activity level improved this week; average volume and value rose 17.0% and 12.9% to 243.5m units and N2.9bn respectively. GUARANTY emerged the highest traded stock by volume and value, accounting for 23.8% and 38.9% accordingly.

The Oil & Gas index declined the most by 6.2% W-o-W on account of sustained loss in FORTE OIL (-9.7%) and SEPLAT (-6.8%). Also in red was the Consumer Goods index which declined 0.1% W-o-W on account of continued depreciation in VONO (-16.3%) and HONEYFLOUR (-13.0%).The Banking index performed better than the previous week with a W-o-W rise of 0.9% due to gains in ZENITH (+4.2%) and ACCESS (-4.2%), UBA (+3.8%) and ETI (+2.7%) W-o-W. The Insurance and Industrial Goods sectors rose 0.6% and 2.5% apiece on bullish sentiments on CONTINENTAL INSURANCE (+5.0%) and DANGOTE CEMENT (+1.9%) respectively.

Investor sentiments measured by market breadth -- ratio of advancers to decliners -- improved slightly to 0.6x from 0.5x the week before. The 27 gainers were topped by MAY & BAKER (+10.6%), OKOMU OIL (+10.2%) and CUTIX (+9.6%) while the 49 losers were led by UNITY BANK (-27.5%), VONO (-16.3%) and IKEJA HOTEL (-13.1%).  Market sentiments seem to be gradually improving after the index dipped to a 3-year low during the week, in the near term, we believe bargain hunting positioning may persist.

Money Market Review and Outlook
Deposits into the Standing Deposit Facility (SDF) continued in high volumes this week as the financial market remains awash with liquidity. With liquidity balance at N539.5bn on Monday, money market rates (Open Buy Back -- OBB and Overnight --O/N) settled at 0.7%, 1.1% and 8.0% for the OBB, O/N and average NIBOR respectively. However, after a 2 months halt in liquidity mop-ups by the Central Bank of Nigeria (CBN), the Bank sold N47.7bn worth of OMO bills during on Wednesday. However, this mop-up did not significantly impact on market liquidity as FAAC allocation worth N221.0bn hit the system. Consequently, the rise in OBB and O/N rates were marginal as both rates closed at 0.7% and 1.0% respectively.

On Thursday however, with the same roll-over value, there was a Treasury Bills (T-Bills) maturity worth N129.2bn. As T-Bills roll over settlement were yet to be extracted from the market, liquidity balance was N1.0tn on Friday. Consequently, OBB, O/N and average NIBOR closed lower W-o-W at 0.6%, 1.0% and 8.8% from 0.8%, 1.0% and 8.3% respectively.

Following the OMO mop-up and Primary Market Auction (PMA) that took place during the week, performance of instruments in the T-Bills market was majorly bearish as average rates rose 3.1% W-o-W to close at 6.1%. Given the bond auction set to hold next week, we expect money market rates to trend marginally higher in the coming week.

Foreign Exchange Market Review and Outlook
Foreign exchange illiquidity has continued unabated in the Nigerian foreign exchange market as the CBN remains unrelenting on its FX stance. Consequently, offer rate at the official window stayed within N197.00/US$1.00 and N196.97/US$1.00 this week. While N197.00/US$1.00 is the dominant offer rate by the CBN, the rate appreciated 3 kobo on Tuesday to N196.97/US$1.00 and stayed same on Wednesday. However, it depreciated back to N197.00/US$1.00 on Thursday and remained at same level on Friday. It is however notable that the appreciation in official FX offer rate occurred during the bank's weekly intervention sale to DMBs.

Consequent on this, after opening the week at N199.10/US$1.00, offer rate at the interbank market equally appreciated 3kobo on Tuesday to N199.07/US$1.00. This appreciation was however reversed on Thursday after interbank offer rate settled at N199.10/US$1.00. On the other hand, the margin between offer rates between the interbank and parallel market continued this week after parallel market rates rose to a high of N242.00/US$1.00 on Monday.

With the CBN's unwavering stance on the local unit, we expect rates in the currency market to stay within the current band.

Bond Market Review and Outlook
The Nigerian bond market recorded mixed performance this week following the huge decline (low of 9.4% last Friday) of average yields last week. At the start of the week, activity in the bond market was largely bearish as most instruments recorded marginal decrease in prices thereby pushing average yields 24bps higher to 9.6% on Monday. Against the Apex Bank's announcement to mop up liquidity the next day, bond market sentiments declined on Tuesday, as investors sold off on all instruments causing average yields to inch further higher to 10.2%. By Thursday however, there was some sort of recovery in market as all instruments save for the AUG 2016 appreciated in price with the NOV 2028 instrument rising the most, adding N1.13 to close N121.61.  Consequently, the shortest tenored instrument, AUG 2016 depreciated on all trading days of the week to bring W-o-W close at N105.54 from N107.22 and yield at 4.9% from 2.8%.

At the close of trade today, average bond yields settled at 10.1%, after rising 68bps W-o-W. With the release of an offer circular, the Debt Management Office (DMO) is set to re-open its FEB 2020 and MAR 2024 bonds next Wednesday. Consequent on this bond prices may trend marginally lower in the coming week.

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