Global COVID-19 cases are currently at 22.3m, an increase of 8.8% from last week while the death toll rose 5.9% to 782,456 persons. The US remains the major epicentre of the pandemic with 5.7m reported cases, which has slowed the reopening of economic activities in more States. Consequently, 1.1 million people filed for unemployment benefits last week amid the grim outlook on economic recovery. On the trade front, there is optimism that tensions between the US and China would ease as China announced the resumption of talks on the implementation of the phase 1 deal signed in January.
Performance in the developed markets was lacklustre with only US indices advancing w/w. The S&P 500 and NASDAQ indices gained 0.5% and 2.6% w/w respectively despite weak labor data. In Europe, France’s CAC 40 lost 1.5% while Germany’s XETRA DAX and UK’s FTSE All Share fell w/w by 1.1% and 1.4%. Japan’s Nikkei 225 and Hong Kong Hang Seng Indices declined 1.6% and 0.3% w/w respectively.
Performance across the BRICS markets was mixed as 3 of 5 indices closed the week lower. Russia’s RTS and South Africa’s FTSE/JSE All-Share indices lost 4.5% and 2.4% w/w despite the progress recorded in COVID-19 vaccine development in both countries. Brazil’s Ibovespa also declined 0.1% w/w. On the flip side, India’s BSE Sens gained the most, up 1.5% w/w. China’s Shanghai Composite trailed, up 0.6% w/w due to improving relations with the US.
In Africa, performance was bearish with only 2 of 6 indices under our coverage advancing w/w. Egypt’s EGX 30 and Nigerian All-Share index gained 2.2% and 0.1% w/w. Kenya’s NSE 20 and Ghana’s GSE Composite indices led the losers, down 1.1% apiece. Morrocco’s Casablanca MASI and Mauritius’ SEMDEX indices also lost, down 0.4% and 3bps w/w respectively.
Across the Asian and Middle East markets, performance was bullish with only Thailand’s SET declining 2.1% w/w. Conversely, UAE’s ADX General and Turkey’s BIST 100 indices led the gainers, up 3.6% and 2.3% w/w respectively. Similarly, Saudi Arabia’s Tadawul ASI and Qatar’s DSM 20 closed higher by 1.8% and 1.7% w/w respectively.
Domestic Equities Market: Local Bourse Extends Gains… ASI up 0.1% w/w
This week, buying interest in INTBREW (+26.3%), DANGSUGAR (+5.0%) and GUARANTY (+0.8%) lifted the benchmark index by 0.1% w/w to 25,221.87 points. Consequently, market capitalisation rose to ₦13.2tn as investors gained ₦12.2bn while YTD loss improved to -6.0%. Activity level declined as average volume and value traded waned 28.3% and 27.3% to 190.1m units and ₦2.0bn respectively. ZENITH (100.0m units), GUARANTY (92.3m units) and TRANSCORP (70.3m units) were the most traded by volume while GUARANTY (₦2.3bn), ZENITH (₦1.7bn) and NESTLE (₦1.1bn) topped by value.
Across all the sectors that we cover, there was a mixed performance. The Oil & Gas index led the laggards as sell-offs in CONOIL (-9.8%) and OANDO (-5.2%) dragged it 0.9% lower w/w. Similarly, the Industrial Goods and AFR-ICT indices shed 0.4% and 0.3% w/w respectively due to price declines in CAP (-5.0%), DANGCEM (-0.7%) and MTNN (-1.0%). On the flip side, buying interest in CORNERSTONE (+18.4%) and MANSARD (+7.5%) positioned the Insurance index (+4.4%) as the best performer. Likewise, gains in GUARANTY (+0.8%), ZENITH (+0.6%) and INTBREW (+26.3%) stoked 0.8% and 1.9% respective w/w gains in the Banking and Consumer Goods indices.
Investor sentiment as measured by market breadth (advance/decline ratio) advanced to 2.1x from the 0.9x recorded last week as 30 stocks gained relative to the 26 that declined. LASACO (+26.9%), INTBREW (+26.3%) and CORNERSTONE (+18.4%) led the top gainers while ROYALEX (-16.1%), ABCTRANS (-14.9%) and CONOIL (-9.8%) were the worst performers. In the coming week, we expect a bearish performance as we anticipate profit-taking on bellwethers.
Foreign Exchange Market: Naira Remain Relatively Stable amid Illiquidity
The external reserves tapered slightly by 7bps w/w to $35.6bn (20/8/2020) as the Apex bank continued its weekly FX intervention sales. On the global front, oil prices fell slightly this week, down 2.5% w/w to $43.7/bbl. due to weak prospects of sharp economic recovery post-pandemic.
The CBN spot rate closed flat at ₦381/$1.00. At the parallel market, naira depreciated ₦2.00 to close at ₦477.00/$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate closed flat at ₦386.00/ $1.00. Activity level in the I&E Window spiked 66.0% to $317.4m from $191.2m recorded in the previous week.
The total value of open contracts of the naira at the FMDQ Securities Exchange (SE) FX Futures Contract Market increased 0.4% ($45.1m) to $13.0bn. The SEPT 2020 instrument (contract price: ₦391.38) received the highest subscription of $50.0m which took total value to $1.3bn. On the other hand, the APRIL 2021 instrument (contract price: ₦410.20) fell by $20.0m with total value at $486.9m. We expect exchange rates to remain range-bound at the official market and the I&E window. However, we expect increased pressure at the parallel market ahead of international travel.
Money Market: OBB and OVN Trend Lower w/w
The OBB and OVN rates opened the week in the double digit band at 16.4% and 17.5% respectively as system liquidity remained tight at c.₦88.0bn (vs. ₦220.7bn as at 14/08/2020). However, both the OBB and OVN rates declined to 13.0% and 13.5% respectively on Wednesday while system liquidity rose to c.₦103.0bn. At the close of the week, the OBB and OVN rates printed at 2.0% and 2.6% respectively with system liquidity settling at c.₦490.0bn.
In the secondary treasury bills market, the performance was mildly bullish as average yield across benchmark tenors trended lower, down 13bps w/w to close at 2.1%. The short-term instrument recorded the most selloffs as yields rose 41bps to 1.6% while the medium-term instrument rose 6bps to 1.3%. On the other hand, the long-term instrument gained as yield declined 61bps to close at 2.3%. In the coming week, we anticipate a bearish performance in the secondary market.
Bonds Market: Yields Trend Higher as Bullish Sentiment Fades in the Secondary Market
This week, the performance in the bond market was bearish as average yield rose by 11bps w/w to close at 7.8%. The market recorded marginal gains on Monday (-3bps) and Thursday (-2bps) while the trading session on Tuesday closed flat. However, sell pressures on Wednesday (+1bps) and Friday (+15bps) were sufficient to offset the previous gains in the market. Across tenors, the short-term bonds recorded improved demand as yields declined 5bps w/w, while short and long term instruments recorded losses, with yields climbing 18bps and 16bps w/w respectively.
At the primary market, the DMO re-opened the JANUARY 2026, MARCH 2035, JULY 2045 and MARCH 2050 instruments, offering ₦25.0bn, ₦40.0bn, ₦45.0bn and ₦40.0bn in that order. All instruments were 1.3x, 1.2x, 1.0x and 2.9x oversubscribed while the MARCH 2035 and MARCH 2050 notes were over allotted. The marginal rates on the instruments were 6.70%, 9.35%, 9.75% and 9.90% respectively (vs 6.0%, 9.5%, 9.8% and 10.0% at the previous month’s auction). On the aggregate, a total of ₦130.0bn was offered with subscription and allotment of ₦470.1bn and ₦177.0bn respectively.
At the SSA Eurobond market, performance was negative across board as yields on all the 31 instruments under our coverage trended higher w/w save for the GHANA 2022 that declined 128bps. The NIGERIA 2027 and 2021 instruments recorded the most selloffs as the respective yields fell 34bps and 30bps w/w respectively. Similarly, the ZAMBIA 2024 and GABON 2024 instruments lost as the respective yields expanded 18bps apiece w/w.
In the Corporate Segment of the Eurobond Market, the bears dominated trade as average yield rose 3bps w/w. The SINBAYE GOLD 2023 and ESKOM HOLDINGS 2025 Eurobonds saw the highest selloff as yield spiked 217bps and 45bps w/w in that order. Also, the FIDELITY 2022 and ABSA GROUP 2028 instruments trailed as their respective yields advanced 19bps and 15bps w/w. On the other hand, BAYPORT MGT 2022 and ECOBANK 2024 instruments led gainers with yields declining 100bps and 25bps w/w respectively. In the coming week, we expect sentiments in the Eurobonds market to improve as yields remain attractive.