Investors Lose N82.83bn as NSEASI Dips by -0.40% to Open the Week Negative
Equities market closed today on a negative note, as NSEASI depreciated by -0.40% to close at 39,326.67 basis points as against +0.02% appreciation recorded previously. Its Year-to-Date (YTD) returns currently stands at -2.34%.
Market breadth closed positive as HONYFLOUR led 19 Gainers as against 18 Losers topped by CHAMPION at the end of today’s session – an unimproved performance when compared with previous outlook.
Market turnover closes positive as volume moved up by +29.27% as against +24.97% uptick recorded in the previous session. TRANSCORP, HONYFLOUR and HMARKINS were the most active to boost market turnover. ZENITHBANK and MTNN topped market value list.
ELLAHLAKES leads the list of active stocks that recorded impressive volume spike at the end of today’s session.
The Bears Take Centre-Stage as Average Yield Expands 27bps WoW to 4.95%
The Nigerian Treasury Bills (“NT-Bills”) secondary market traded on a bearish note throughout last week, as market participants exited positions across the curve given the subdued liquidity levels (sinking to N201.1bn negative on Tuesday) and ahead of Wednesday’s Primary Market Auction (“PMA”).
Consequent on this, average yields on secondary market NT-Bills expanded 27bps W-o-W to 4.95% with the 28-Apr-22 (+83bps W-o-W) and 12-May-22 (+89bps W-o-W) bills advancing the most and closed the week on a quiet note with minimal trading activities post-PMA.
At the PMA, the Apex Bank’s total offer of N157.2bn across the 91-, 182- and 364-Day tenors was met with strong demand, recording an overall subscription of N394.1bn (subscription ratio: 2.5x) and with the most demand centered on the 1-Year offer (subscription ratio: 3.3x). In addition, stop rates for the long offer recorded a further contraction of 55bps from the last auction to settle at 6.80%.
Please see below details of the PMA:
Auction Date 25-Aug-21 25-Aug-21 25-Aug-21
Allotment / Issue Date 26-Aug-21 26-Aug-21 26-Aug-21
Tenor (91-Day) (182-Day) (364-Day)
Offer (N) 3,123,978,000.00 32,705,313,000.00 121,376,867,000.00
Subscription (N) 4,843,952,000.00 24,170,251,000.00 365,106,158,000.00
Allotment (N) 3,537,952,000.00 22,864,251,000.00 280,934,106,000.00
Range of Bid Rates (%) 1.7500-8.0000 3.0000-9.5000.00 4.5000-10.5000.00
Stop Rates (%) 2.50 3.50 6.80
Previous Stop Rates (%) 2.50 3.50 7.35
Subscription Ratio 1.6x 0.7x 3.0x
Allotment Ratio 0.7x 1.0 0.8x
This week, we expect that the NT-Bills secondary market will sustain its bearish posture with no significant inflows expected during the week to offset pressured liquidity levels (despite the improvement to N137.3bn long as at Friday). Thus, we advise investors to position in relatively attractive maturities that advanced W-o-W across the curve and stay alert for prime corporate offerings – such as commercial papers.
Please see NT-Bills indicative rates below:
Maturity Tenor (Days) Rate (%) p.a. Yield (%) p.a.
25-Nov-21 87 3.25 3.28
13-Jan-22 136 3.95 4.01
31-Mar-22 213 4.85 4.99
26-May-22 269 6.40 6.72
30-Jun-22 304 6.96 7.39
14-Jul-22 318 7.26 7.75
FGN Bonds Update: Sustained Bullish Performance as Average Yields Dip 23bps to 11.15%
Last week, the FGN Bond secondary market maintained its bullish run, fuelled by a sustained flow of lost primary market bids. As a result, average yields across all maturities dipped 23bps W-o-W to 11.15% (from 11.38% the previous week).
While demand was recorded across the curve, short-term FGN Bonds enjoyed the most demand, inching 32bps southwards W-o-W, particularly on the MAR- 25 and JAN-26 maturities that dipped the most by 47bps and 48bps W-o-W respectively.
Going into the week, we expect a sustained pressure on average FGN Bond secondary market yields as investors continue to position in relatively attractive maturities given the perceived impending lower yield environment. Thus, we advise investors to trade cautiously in the secondary market while also looking out for attractive offers from corporates.
Please see below FGN Bonds secondary market indicative rates:
Bond Tenor (Years) Yield (%) Coupon (%) Implied Price (N)
Apr-23 2 8.30 12.75 106.73
Mar-24 3 8.30 14.20 113.24
Mar-25 4 9.60 13.53 111.61
Jan-26 5 9.70 12.50 109.80
Mar-27 6 10.35 16.29 124.57
Feb-28 7 10.55 13.98 115.81
Jul-34 13 11.30 12.15 105.66
Mar-36 15 11.70 12.40 104.82
Apr-37 16 11.55 16.25 133.61
Apr-49 28 11.65 14.80 125.81
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For the second consecutive quarter, the Manufacturing sector’s real GDP grew by 3.49% y/y in Q2 2021, the highest growth since Q1 2015. Though this can be largely attributed to the low base in the prior year, there are indications that conditions for manufacturing are improving. Also, the readings for Manufacturing PMI rose to 46.6 in July from 45.5 in June 2021, showing a gradual recovery of output growth, though still below the 50-index point mark. Meanwhile, the continued efforts by the government to reposition critical sectors such as manufacturing on the path of growth have proved supportive.
We recall that the outbreak of the coronavirus negatively affected the manufacturing activities, touching a low of -8.78% in Q2 2020. This coupled with existing structural bottlenecks forced many businesses out of operations. Several companies saw demand for their goods plummet on the back of movement restrictions, and consumer behaviour turned towards the search for essential items. However, since the reopening of the economy, we believe gains from exports via open borders and increased credit supply to manufacturing businesses cut the sector some slack from the harsh effects of the pandemic.
As the economy continues to recover, we expect further improvement in the manufacturing sector. On the flip side, FX constraints, supply chain disruptions and weak disposable income are all factors that will continue to undermine growth in the sector. The need to boost the manufacturing sector is pertinent to achieving the country’s output projection and if structural constraints remain unaddressed, growth in the manufacturing sector will remain lackluster. Also, we observed that the negative impact of the oil refining subsector has continued to drag performance in the manufacturing sector with consolidated refining capacity at zero levels.
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