The total number of COVID-19 cases surpassed 50.0 million this week, settling at 51.8 million while the death toll rose 3.9% to 1.3 million. With the US remaining the epicenter of the virus with 10.1 million confirmed cases, trailed by India (8.7m) and Brazil (5.7m). Also, ICU capacity across the globe are reaching limit prompting countries to impose another lockdown to curb the pandemic. Meanwhile, positive signs surrounding a potential vaccine from Pfizer & BioNTech and Moderna spurred a glimpse of hope, reducing uncertainty. However, global central banks though encouraged about a potential vaccine are not optimistic given that the coronavirus is exponentially rising, and the required delivery time may be long. Elsewhere, OPEC+ revised down its expectation for global oil demand this year by cutting forecast by 300,000bpd, and delaying an increase to production rates that was set by January. This is as a result of a renewed spike in the number of coronavirus cases in major economies which have led to new lockdowns and curfews resulting in weaker oil demand recovery.
In the developed markets, performance was bullish as 6 of the 7 indices under our coverage closed northward. In the US markets, the S&P 500 rose 1.4% w/w while the NASDAQ index fell 1.2% w/w. In Europe, UK’s FTSE All-share, France’s CAC 40 and Germany’s XETRA DAX indices advanced 7.1%, 8.4% and 4.8% w/w respectively as the European Union reached a deal on the bloc’s long-term spending plans, a step closer to finalising its landmark €1.8tn budget and stimulus. Similarly, Japan’s Nikkei 225 and Hong Kong’s Hang Seng indices gained 4.4% and 1.7% w/w respectively.
In the BRICS market, performance was bullish as 4 of the 5 indices closed in the green. Russia’s RTS index led gainers, up 4.2% w/w following OPEC+ news on delaying an increase to oil production rates. Similarly, India’s BSE Sens and Brazil’s Ibovespa indices rose 3.7% and 2.7% w/w respectively despite the surge in the number of COVID-19 cases. South Africa’s FTSE/JSE All Share index inched higher by 1.4% w/w. Conversely, China’s Shanghai Composite fell 0.1% w/w.
In the African Market, there was a stellar performance as all indices we cover recorded gains w/w. Nigeria’s All Share Index led gainers, up 13.0% due to a low yield environment in the fixed income market and positive earnings result. Similarly, Egypt’s EGX 30, Morocco’s Casablanca MASI and Mauritius’ SEMDEX indices rose 3.7%, 2.9% and 2.6% respectively. Likewise, Kenya NSE 20 and Ghana’s GSE Composite indices inched higher by 1.1% and 0.8% w/w respectively.
In Asia and the Middle East, performance was bullish as all indices closed northward w/w. Turkey's BIST 100 index led the pack, up 8.3% following an agreement to end the war between Azerbaijan vs Armenia. Similarly, Thailand’s SET and Saudi Arabia’s Tadawul ASI indices surged 6.9% and 4.3% w/w respectively. Qatar's DSM 20 and UAE’s ADX General indices posted gains of 3.3% and 2.9% w/w respectively following OPEC+ news to delay increase in oil production rates in early 2021.
Domestic Equities Market: Raging Bulls Dominate Trade… ASI up 13.0% w/w
This week, the domestic bourse continued the positive run as market gained on all trading days save on Friday. Consequently, the benchmark index spiked 13.0% w/w to 35,037.46 points, buoyed by sharp gains in ZENITH (+21.7%), BUACEMENT (+20.9%) and DANGCEM (+14.6%). As such, market capitalisation advanced by ₦2.1tn to ₦18.3tn while YTD return surged to 30.5%. Also, there was a sharp increase in activity level as average volume and value traded rocketed 134.1% and 160.4% to 901.9m units and ₦11.7bn respectively. The most traded stocks by volume were FBNH (398.9m units), ZENITH (360.3m units) and ACCESS (263.2m units) while ZENITH (₦9.3bn), GUARANTY (₦5.0bn) and MTNN (₦4.2bn) led by value.
Performance across sectors was outstanding as all 6 indices that we track gained w/w. The Industrial Goods and Banking indices led the gainers, up 17.0% and 14.4% w/w respectively on the back of price appreciation in ZENITH (+21.7%), BUACEMENT (+20.9%) and DANGCEM (+14.6%). Similarly, the AFR-ICT and Consumer Goods indices advanced 13.0% and 11.4% w/w respectively, reflecting buying interest in MTNN (+7.6%), AIRTELAFR (+19.4%), DANGSUGAR (+34.5%) and NIGERIAN BREWERIES (+21.3%). Lastly, the Insurance and Oil & Gas indicators rose 7.7% and 5.3% w/w respectively, buoyed by gains in OANDO (+48.1%), LINKASSURE (+22.0%) and WAPIC (+18.2%).
Investor sentiment as measured by market breadth (advance/decline ratio) strengthened to 6.7x from the 1.6x recorded last week as 67 tickers gained against 10 decliners. OANDO (+48.1%), JAPAULOIL (+43.5%) and NNFM (+40.0%) led the top gainers while IKEJAHOTEL (-9.9%), MORISON (-9.3%) and CAP (-3.7%) led the underperformers. While we anticipate profit-taking in the coming week, we expect the equities market to extend the bullish streak with mild gains.
Foreign Exchange Market: Oil Prices Remain Afloat amid Potential COVID-19 Vaccine
In its monthly report, OPEC+ revised down its oil demand forecasts for the remainder of the year and 2021 as a result of a weaker-than-expected economic outlook and a surge in COVID-19 cases. OPEC+ expects oil demand to contract c.9.8m/bpd in 2020, a 0.3m/bpd from last month’s assessment while in 2021, oil demand growth is projected to rise by 6.2m/bpd. However, given a potential COVID-19 vaccine, oil prices posted gains this week rising 8.6% w/w to $40.32bbl. Meanwhile, the external reserves declined 0.1% ($31.6m) to $35.6bn from $35.7bn last week.
The CBN spot rate traded flat all week to close at ₦379.00/$1.00. Similarly, at the parallel market, rates opened at ₦464.00/$1.00 and closed at ₦470.00/$1.00, depreciating ₦6.00kobo w/w. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate opened at ₦386.21/$1.00 and closed at ₦386.00/$1.00 on Friday, unchanged from the prior week. Activity level in I&E Window fell 22.5% to $561.3m from $723.9m recorded in the previous week.
At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts of the Naira settled at $9.93bn, up $19.1m (+0.2%) from $9.92bn in the prior week. The OCT 2021 instrument (contract price: ₦420.05) received the most buying interest in the week with additional subscription of $3.5m which took total value to $43.9m. On the other hand, the MAY 2021 instrument (contract price: ₦405.86) was the least subscribed with additional subscription of $1.2m bringing the total value to $726.1m. Next week, we expect stronger FX demand due to the easing of lockdown across major economies to put pressure on the exchange rate in the near term.
Money Market: Strong Demand Drives Rate Lower in the Secondary Market
This week, the interbank rates (OBB and OVN) opened the week at 1.9% and 2.3% respectively, relatively lower than 5.7% and 6.4% recorded at the close of the previous week despite system liquidity falling from ₦904.2bn from c.₦140.3bn. On Wednesday, the OBB and OVN rate fell to 0.6% and 1.1% following inflows from OMO maturities worth ₦226.8bn. Furthermore, on Friday, the OBB and OVN rate closed the week at 0.5% and 0.6% respectively as system liquidity settled to ₦151.4bn.
On Wednesday, the CBN at the primary market auction (PMA) issued 91-day (Offer: ₦19.8bn; Subscription: ₦99.9bn; Sale: ₦19.8bn), 182-day (Offer: ₦40.1bn; Subscription: ₦92.2bn; Sale: ₦10.0bn) and 91-day (Offer: ₦107.9bn; Subscription: ₦411.1bn; Sale: ₦7.5bn) instruments. Across tenors, marginal rate trended lower to 0.035%, 0.15% and 0.30% from 1.0%, 1.0% and 2.0% at the previous auction for the 91, 182 and 364-day notes respectively. Demand remained strong at the auction as instruments across board were oversubscribed at 5.7x (91-day), 2.3x (182-day) and 3.8x (360-day) respectively.
This week, performance in the T-bills market was bullish as excess funds from the primary auction filtered into the secondary market. Consequently, average yield across benchmark tenors declined 28bps w/w to close at 0.1%. At the close of the week, the mid-term instrument enjoyed the most buying interest as the average yields declined 52bps w/w to 0.1% while yield on the short and long-term instruments dived 27bps and 4bps w/w to 0.1% and 0.2% respectively. In the coming week, we expect the CBN to resume its liquidity intervention as OMO worth ₦103.1bn would hit the system. We expect rates in the secondary T-Bills market to remain low due to huge money supply.
Bonds Market: Profit Taking Halts Bullish Run in the Domestic Bonds Market
This week, the DMO sold its FGN Savings Bond with a total allotment of ₦298.6bn (FGN NOV 2022 – ₦27.9bn and FGN NOV 2023 – ₦295.6bn). The FGNSB 2022 and 2023 instruments were issued at a marginal rate of 1.76% and 2.76% respectively lower than the 2.45% and 3.45% at the previous auction in October.
Profit taking on 3 of 5 trading sessions dragged the performance of the secondary market as average yield inched higher by 0.2% w/w to settle at 4.0%. Across tenors, the mid-term instruments recorded the most selloffs as average yield increased 43bps w/w while the short and long-term instrument rose 3bps apiece.
In the SSA Eurobonds segment, bullish sentiment was sustained as average yield fell 11bps w/w to close at 9.4%. The GABON 2025 recorded the most gains as yield dropped by 41bps w/w. Trailing, yield on the Nigeria 2022 and 2032 instruments fell 39bps and 37bps respectively. On the other hand, ZAMBIA 2024 and 2022 notes were the worst performing instruments for the week as their yields climbed 0.5% and 1.2% w/w respectively. This happened after bondholders rejected Zambia’s request for debt relief in a meeting during the week.
The bullish run resumed in the Corporate Eurobonds market as all instruments under our coverage recorded gains w/w. Consequently, average yield declined 34bps w/w to 5.6% (ex-SIBANYE GOLD 2023 instrument). The top gainers were ESKOM HOLDINGS 2021 and FIDELITY 2022 respectively, down 160bps and 140bps w/w. Similarly, the NEERG ENERGY 2022 and BAYPORT MGT 2024 recorded a 66bps and 61bps decline in yield w/w. In the coming week, we expect profit taking to drag performance in the domestic bond market while we expect sell-offs in the ZAMBIAN instruments to pressure average yields in the SSA segment.