Global Equities Market
Globally, active cases of COVID-19 rose 6.4% to 30.5 million while confirmed deaths grew 3.6% to 952,293. Sentiment remained weak in financial markets this week following an increase in COVID-19 cases, although monetary policy easing was sustained by major central banks in recent meetings. In the US, the Federal Reserve retained the policy rate at 0%-0.25% and signaled that it would be unchanged through 2023 until inflation rises above the 2.0% target. Meanwhile, the contentious debate about additional fiscal stimulus in the US saw slight progress as President Trump showed support for a US$1.5tn bi-partisan deal, although there is yet to be a consensus among legislators from both parties. Similarly, the Bank of England (BoE) left the rate at 0.1% after cutting it twice from 0.75% since the start of the pandemic and maintained its asset purchases at £745.0bn (US$960.8bn). Also, the Bank of Japan (BoJ) held its policy rate at -0.1% while stating there are no immediate plans to expand its stimulus package.
In the developed markets, the performance was negative as 5 of 6 indices under our coverage lost. The US S&P 500 and NASDAQ indices pared 0.1% and 0.3% w/w respectively despite the Fed’s position on rates. France’s CAC 40 and Germany’s XETRA DAX indices declined 0.9% and 0.3% w/w respectively. Similarly, Hong Kong’s Hang Seng and Japan’s Nikkei 225 indices closed the week lower by 0.2% apiece. Conversely, UK’s FTSE All-Share index rose 0.3% despite growing COVID-19 cases and uncertainty around the UK-EU trade deal.
In the BRICS markets, 3 of 5 indices tracked posted gains. China’s Shanghai Composite index led gainers, up 2.4% w/w as industrial production and retail sales grew 5.6% and 0.5% y/y respectively. Similarly, Brazil’s Ibovespa and Russia’s RTS indices rose 1.6% and 0.6% w/w respectively as investors expect policy rates to be held. Conversely, India’s BSE Sens and South Africa’s FTSE/JSE All Share indices lost 2bps and 2.4% w/w respectively.
There was a poor performance across the African markets under our coverage as Ghana’s GSE Composite index was the lone gainer, up 0.8% w/w. Conversely, Kenya’s NSE 20 and Morocco’s Casablanca MASI indices fell 1.5% and 1.4% w/w respectively. Also, Egypt’s EGX 30 and Mauritius' SEMDEX indices lost 0.2% w/w apiece. Finally, Nigeria's ASI index dipped 0.1% w/w.
Performance across the Asian and Middle East markets under our coverage was positive as only the UAE’s ADX General index declined 0.2% w/w. Saudi Arabia’s Tadawul ASI and Qatar’s DSM 220 indices gained 2.5% and 1.8% w/w respectively following optimism on oil prices. Also, Turkey’s BIST 100 and Thailand’s SET indices closed the week higher at 0.8% and 0.7% respectively.
Domestic Equities Market: Profit-Taking Drags Performance… ASI down 0.1% w/w
At the close of the week, there was a negative performance in the domestic equities market as investors took profits in ZENITH (-2.9%), ACCESS (-4.4%) and STANBIC (-2.3%). Consequently, the NSE All-Share Index fell 8bps w/w to 25,572.57 points. Similarly, the YTD loss worsened to -4.7% while market capitalisation rose ₦13.6bn w/w to ₦13.4tn. Activity level was mixed as average volume declined 6.9% to 227.7m units while average value rose 17.1% to ₦2.5bn. The top traded stocks by volume were FBNH (118.1m units), GUARANTY (102.8m units) and ACCESS (82.0m units) while GUARANTY (₦2.3bn), MTNN (₦1.9bn) and ZENITH (₦1.3bn) led by value.
Performance across sectors was mixed although positively skewed as 3 of 6 indices under our coverage trended northward w/w. The Industrial Goods index led gainers, up 0.5% w/w on the back of bargain hunting in CAP (+8.6%) and BERGER (+7.4%). Trailing, the Consumer Goods and Insurance indices rose 0.1% and 1bp w/w respectively due to price appreciation in NIGERIAN BREWERIES (+2.3%), VITAFOAM (+1.9%), WAPIC (+12.1%) and PRESTIGE (+5.8%). Conversely, the Oil & Gas index led losers, down 1.0% w/w following sell-offs in OANDO (-4.2%) and SEPLAT (-1.3%) while price depreciation in FCMB (-6.4%), ETI (-4.8%) and ACCESS (-4.4%) dragged performance in the Banking index by 0.7% w/w. Finally, the AFR-ICT index closed flat.
Investor sentiment as measured by market breadth (advance/decline ratio) strengthened to 0.9x from 0.7x as 29 stocks advanced against 31 that declined. The top performing stocks for the week were WAPIC (+12.1%), LEARNAFRCA (+9.6%) and UNITYBNK (+9.6%) while ABCTRANS (-16.7%), NEM (-9.8%) and TRIPPLEG (-9.1%) were the laggards. In the coming week, we anticipate that investors will continue to take profit.
Foreign Exchange Market: Oil Price Rebounds as OPEC+ Urge Strict Compliance
Brent crude oil price rose 8.1% w/w to US$43.30bbl (9/17/2020) as OPEC+ encouraged members to comply with output cuts. Meanwhile, OPEC and IEA reduced their oil demand projections to an average of 90.2mbpd and 91.7mbpd, a 9.5mbpd and 8.7mbpd y/y decline respectively. This was on the back of worries over a slower-than-expected recovery in demand amid rising COVID-19 cases. Locally, the external reserves increased by 0.1% w/w to US$35.8bn (9/17/2020).
In the FX market, the CBN spot rate traded flat all week at ₦379.00/US$1.00 while the rate at the parallel market depreciated ₦10.00 w/w to settle at ₦465.00.00/US$1.00. At the Investors & Exporters (I&E) Window, the NAFEX rate closed flat at ₦386.00/US$1.00. Activity level in the I&E Window increased 237.6% to US$812.8m from US$240.8m recorded in the previous week.
At the FMDQ Securities Exchange FX Futures Contract Market, the total value of open contracts settled at US$12.6bn, up 0.4% (US$46.5m) from the prior week. The June 2021 instrument (contract price: ₦415.12) had the most demand with an additional subscription of US$6.7m putting the total value at US$49.0m. Meanwhile, the September 2021 instrument (contract price: ₦423.90) saw sell-off worth US$19.3m as the total value settled at US$95.7m. In the coming week, we expect Naira to remain within a similar band across the different FX segments.
Money Market: Interbank Rates Fall despite Weaker System Liquidity
This week, the OBB and OVN rates opened at 5.0% and 5.8% respectively, lower than last week’s close of 14.5% and 16.5% despite a sharp decline in system liquidity from ₦597.5bn to ₦219.0bn. The trend persisted on Wednesday, as the OBB and OVN rates fell to 3.5% and 4.0% respectively while system liquidity decreased to ₦195.2bn. On Friday, the OBB and OVN rates moderated to 2.0% and 3.0% respectively while system liquidity closed the week lower at ₦216.1bn.
To mop up liquidity from maturing T-bills worth ₦178.8bn on Thursday, the apex bank offered new instruments worth ₦158.7bn across the 91-day (₦2.0bn), 182-day (₦8.4bn) and 364-day (₦148.4bn) instruments on Wednesday. Overall, the offer was oversubscribed at 2.0x, 1.8x and 1.2x for the 91-day, 182-day and 364-day instruments respectively. Despite the oversubscription, the CBN allotted the offered amount across the board. Notably, the marginal rate sustained a downtrend, falling to an average of 1.88% (91 days - 1.09%, 182 days - 1.50% and 364 days – 3.05%) from 1.90% (91 days - 1.10%, 182 days - 1.55% and 364 days – 3.05%) in the previous auction.
The CBN also conducted an OMO auction worth ₦70.0bn on Thursday. The auction was oversubscribed at a bid to offer of 2.8x. The 355-day instrument (Offer: ₦50.0bn; Subscription: ₦163.3bn; Sale: ₦50.0bn) was the most oversubscribed as bid to offer stood at 3.3x while the 173-day (Offer: ₦10.0bn; Subscription: ₦19.6bn; Sale: ₦10.0bn) and 138-day (Offer: ₦10.0bn; Subscription: ₦13.6bn; Sale: ₦10.0bn) instruments recorded excess subscription with bid to offer at 2.0x and 1.4x respectively. Marginal rates closed slightly lower at 7.14% (138 days - 4.86%, 173 days - 7.68% and 355 days 8.88%) from 7.15% (138 days - 4.86%, 173 days - 7.68% and - 355 days 8.90%) in the previous auction.
In the secondary T-bills market, investors gained as average yield dropped 5bps w/w to 1.73%. Across tenors, the 91-day and 182-day assets recorded gains as their respective yields fell 21bps and 10bps to at 1.15% and 1.40%. Conversely, the yield on the 364-day instrument rose 15bps. In the absence of inflows from maturing instruments in the week ahead, we expect money market rates to remain relatively stable.
Bonds Market: Secondary Market Extends Positive Performance
The domestic bonds market ended the week positive as average yield declined 10bps w/w to 7.1% following gains on 2 of 5 trading sessions. Across tenors, the mid-end instruments had the most buying interest as average yield dived 19bps while average yields on short and long-term bonds reduced 4bps and 3bps w/w respectively.
At the SSA Eurobond market, the performance was mixed albeit negatively skewed as average yield rose marginally by 1bps w/w to 8.3%. The ZAMBIA 2024, 2022 and 2027 instruments enjoyed the highest demand, shedding 52bps, 96bps and 37bps w/w respectively due to bargain hunting. Similarly, the SOUTH AFRICA 2022 and GHANA 2022 instruments recorded gains as their respective yields fell 19bps and 3bps. Conversely, the yield on the NIGERIAN 2021 instrument rose the most at 36bps w/w while the GHANA 2049 and 2026 instruments trailed with 17bps and 11bps increase in yield respectively.
The African Corporate Eurobonds under our coverage closed the week bullish as average yield (excluding SINBAYE GOLD 2023) dipped 5bps w/w. The ESKOM HOLDINGS 2021 and BAYPORT MGT 2022 instruments enjoyed the most buying interest following a 78bps and 26bps drop in yields respectively. On the flip side, FIDELITY 2022 and TRANSNET SOC LTD 2022 recorded sell-off with their respective yields rising 12bps and 5bps w/w. Elsewhere, Sibanye-Stillwater’s wholly-owned subsidiary, Sibanye Gold, exercised its option on its $450m, 1.875% convertible bond on the 18th Sept 2020. The decision was premised on the company’s effort to further improve the leverage and capital structure of the group. As a result, yield on the SINBAYE GOLD 2023 instrument fell 175.1% w/w, indicating that investors were satisfied with the company's restructuring plans. In the week ahead, we expect the soft demand in the domestic and Eurobonds space to be sustained.