Global Equities Market
COVID-19 continued its uptrend this week as total active cases rose 10.7% to 18.6 million while confirmed deaths increased 6.1% to 702,642 persons. The US (4.7 million cases), Brazil (2.8 million cases) and India (2.0 million cases) remain the hardest hit countries. In the US, the ongoing resumption of economic activities supported a reduction in unemployment rate to 10.2% in July 2020 from 11.1% in the prior month. However, as we suspect that further restrictions on economic activities were implemented in states recording a spike in COVID-19 cases, the increase in total non-farm payroll employment slowed to 1.8 million in July 2020 from 4.8 million in the previous month. Beyond COVID-19, US-China tensions escalated this week as President Trump signed executive orders banning transactions with China’s technology giants, Tencent (WeChat) and ByteDance (TikTok).
In the developed markets, all indices under our coverage gained, save the Hong Kong’s Hang Seng index which declined 0.3% w/w due to losses in technology stocks. Meanwhile, US’ S&P 500 and NASDAQ indices appreciated 2.4% and 3.1% w/w respectively despite rising US-China tensions. France’s CAC 40 and Germany’s XETRA DAX indices gained 2.2% and 2.9% w/w respectively while UK’s FTSE All Share index added 2.5% w/w as the Bank of England (BoE) left rates unchanged at 0.1%. Finally, Japan’s Nikkei 225 index closed the week higher by 2.9%.
The BRICS markets we tracked also recorded bullish performances w/w as all indices gained. Russia’s RTS index led the pack, up 3.2% w/w. Similarly, South Africa’s FTSE/JSE All Share and Brazil’s Ibovespa indices gained 1.9% and 0.1% w/w respectively. Also, China’s Shanghai Composite index closed higher at 1.3% w/w despite worsening relations with the US. Lastly, India’s BSE Sens index posted a positive return, up 1.2% as monetary authorities held rates at 4.25%.
Across the African markets under our coverage, all indices ended in the green, save Kenya’s NSE 20 and Mauritius' SEMDEX indices which lost 2.6% and 1.8% w/w respectively. Conversely, Egypt’s EGX 30 index gained the most, up 2.3% following the signing of Egypt-Greece Exclusive Economic Zone Agreement which would allow both countries utilise oil and gas reserves within the area. Trailing, Nigeria's ASI and Ghana’s GSE Composite indices increased 1.4% and 0.5% w/w respectively while Morocco’s Casablanca MASI index rose 0.3% w/w.
Performance across the Asian and Middle East markets under our coverage was bullish as 3 of 5 indices trended northward w/w. UAE’s ADX General index led the gainers, up 0.8% w/w. Similarly, Saudi Arabia’s Tadawul ASI and Qatar’s DSM 220 indices gained 0.5% and 0.4% w/w respectively. On the flip side, Turkey’s BIST 100 and Thailand’s SET indices dropped 6.6% and 0.3% w/w respectively.
Domestic Equities Market: Buying Interest Boosts Performance… ASI up 1.4% w/w
At the close of the week, the domestic equities market posted a positive performance following buying interest in GUARANTY (+8.2%), STANBIC (+10.0%) and SEPLAT (+12.8%). Consequently, the NSE All-Share Index closed in the green on all trading sessions, rising 141bps w/w to settle at 25,041.89 points. Similarly, YTD loss eased to -6.7% while market capitalisation rose ₦181.6bn w/w to ₦13.1tn. Activity level strengthened as average volume and value rose 51.5% and 21.4% to 213.0m units and ₦2.2bn respectively supported by the three trading sessions from last week. The top traded stocks by volume were FBNH (121.5m units), ACCESS (77.3m units) and TRANSCORP (54.7m units) while PRESCO (₦1.3bn), GUARANTY (₦1.1bn) and MTNN (₦983.7m) led by value.
Performance across sectors was bullish as 5 of 6 indices under our coverage trended northward w/w. The Banking index led gainers, up 4.9% on the back of sustained buying interest in STANBIC (+10.0%), GUARANTY (+8.2%) and UBA (+5.6%). Trailing, the Oil & Gas and Consumer Goods indices rose 4.8% and 0.7% respectively on account of bargain hunting in SEPLAT (+12.8%), FLOURMILL (+13.2%) and GUINNESS (+8.5%). Price appreciation in MTNN (+0.5%), CUTIX (+4.8%) and BUACEMENT (+0.3%) drove the AFR-ICT and Industrial Goods indices higher by 0.3% and 0.1% respectively. Conversely, the Insurance index was the lone laggard, down 0.3% as investors took profits on CUSTODIAN (-9.1%) and NEM (-6.5%).
Investor sentiment as measured by market breadth (advance/decline ratio) strengthened to 2.7x from the 0.9x recorded last week as 40 stocks advanced against 15 that declined. The top performing stocks for the week were NEIMETH (+21.3%), UAC-PROP (+18.5%) and FLOURMILL (+13.2%) while UACN (-11.4%), TOTAL (-9.9%) and CUSTODIAN (-9.1%) were the laggards. In the coming week, we anticipate a mixed performance as investors react to more corporate earnings releases. However, we expect to see some profit-taking activities given the bullish performance this week.
Foreign Exchange Market: Naira Appreciates at the Investors & Exporters’ Window
The external reserves maintained its downtrend this week, declining 0.6% w/w to $35.7bn (8/6/2020) as the apex bank continued its weekly FX intervention sales. On the global front, Oil prices rose, up 2.2% w/w to $44.5/bbl. even as the OPEC+ eased daily oil production cut to 7.7m barrels from 9.7m barrels.
The CBN spot rate at the official window closed flat at ₦381/$1.00. At the parallel market, naira appreciated ₦1.00 to close at ₦474.00/$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate appreciated ₦3.25 to settle at ₦386.00/ $1.00. Activity level in the I&E Window surged 45.0% to $177.9m from the $121.8m recorded in the previous week although there were only three trading sessions last week.
The total value of open contracts of the naira at the FMDQ Securities Exchange (SE) FX Futures Contract Market increased 1.9% w/w ($30.3m) to $12.9bn. The SEPT 2020 instrument (contract price: ₦394.67) received the highest subscription of $17.1m which took total value to $1.2bn. On the other hand, the JAN 2021 instrument (contract price: ₦405.52) recorded the least subscription of $1.7m with a total value of $1.2bn. We expect exchange rates to remain range-bound across the different segments of the market in the coming week.
Money Market: Bearish Sentiment Resurfaces in the Secondary T-bills Market
The OBB and OVN rates opened the week higher at 13.3% and 14.3% respectively, although system liquidity rose slightly to ₦778.0bn (vs. ₦769.2bn as at 29/07/2020). However, both the OBB and OVN rates declined to 8.5% and 9.3% respectively on Wednesday while system liquidity plunged to ₦195.8bn. At the close of the week, the OBB and OVN rates printed at 6.3% and 7.2% respectively with system liquidity settling at ₦220.7bn.
In the secondary T-bills market, bearish momentum resurfaced as average yield closed higher by 6bps w/w to 2.0%. While the yield at the longer end was flat at 2.9%, the short-term instrument recorded a mild gain as yield moderated 1bp w/w to 1.2%. On the other hand, there were sell-offs in the medium-term instrument with average yield climbing 18bps w/w to 2.0%.
As a result of the tight system liquidity towards the end of the week, the CBN did not conduct any auction this week. However, given the apex bank’s management of system liquidity, we expect money market rates to trade at a similar band in the coming week despite maturing T-bills and OMO instruments worth ₦56.7bn and ₦89.0m respectively.
Bonds Market: The Bulls Take a Nap
Following successive weeks of stellar demand, profit-taking in the secondary market forced trading to close the week bearish. As a result, average yield spiked 73bps w/w to 7.6% following sell-offs on 4 of 5 trading sessions. Across tenors, the long-term notes recorded the most sell pressures with yields rising 112bps w/w. Similarly, the mid and short-term instruments recorded 82bps and 11bps rise in yields respectively.
At the SSA Eurobond market, investors continued to cherry-pick attractive instruments as average yields declined 11bps w/w to settle at 8.5%. The NIGERIA 2025 and 2031 instruments enjoyed the highest demand, shedding 39bps and 38bps w/w respectively. Similarly, the GHANA 2030 and lVORY COAST 2031 instruments recorded gains as yields fell 22bps and 14bps respectively. Conversely, yields on the ZAMBIA 2022 rose 11bps w/w to lead the losers while the KENYA 2028 and 2048 instruments trailed with 4bps w/w increase apiece.
For the African Corporate Eurobonds under our universe, the bullish streak persisted as average yields dived 9bps w/w to close at 5.0%. The UNITED BANK OF AFRICA 2022 and NEERG ENERGY 2022 instruments were the best performers as their respective yields fell 39bps and 22bps. On the flip side, the ESKOM HOLDING 2023 and 2025 bonds led laggards with yields expanding 147bps and 16bps w/w in that order. In the coming week, we expect sentiment in the domestic market to be mixed. However, we expect to see sustained demand in the Eurobonds market as global oil prices remain stable.