Amidst continued risk off sentiments and the absence of positive market catalysts, trading in the Nigerian equities market was volatile, with the ASI alternating between gains and losses through each trading session this week.
Ultimately, the market closed lower week-on-week (-0.3% to 27,698.69 points) as significant selloffs of market heavyweight, AIRTELAFRI (-19.0%), offset gains in STANBIC (+22.4%), GUARANTY (+5.3%) and MTNN (+0.7%), and dragged the YTD loss to 11.87%.
Analysing by sectors, the Insurance (+4.8%), Consumer Goods (+2.2%), Banking (+1.8%) and Oil & Gas (+0.5%) all recorded gains, while the Industrial Goods (+0.0%), index closed flat.
Over the coming week, we expect the market to remain pressured given global risk-off sentiments and weak domestic participation. Nonetheless, we note that valuations remain attractive while price deterioration has resulted in expected dividend yields on some stocks rising significantly to levels on par with yields on Treasury bills. Hence, we advise that long-term investors consider appropriately timed investments.
Meanwhile, the overnight (OVN) rate remained moderate during the week in line with liquidity dynamics in the market. However, given the boost to liquidity over the prior week, the OVN rate settled 617.1ppts lower week-on-week. On the first trading day, the rate settled 11.6ppts higher at 36.7% as system liquidity became strained.
However, as maturities filtered into the market from the 17th, the rate moderated, first by 18.1ppts to 18.3%, and then by 2.7ppts to 15.6% on the 18th. However, on the penultimate trading day of the week, the rate increased by 2.5ppts to settle at 18.1%, as an OMO held by the CBN drained system liquidity.
In the coming week, maturities worth NGN440.17 billion are expected to hit the system on the 23rd (NGN18.12 billion Treasury bond coupon from the 13.53 23-MAR-2025 instrument) and 26th (NGN422.05 billion from OMO maturities). Consequently, we expect the OVN rate to spike at the start of the week given the negative liquidity position of the market (NGN176.06 billion), but pare as liquidity conditions improve.
Activities in the Treasury bills market were seemingly bearish as the average yield pared by 23bps to settle at 13.6%. In line with our expectations, the CBN held PMA and OMO auctions to manage system liquidity.
At the CBN held a Treasury bills PMA during the week on the 20th, when instruments worth NGN179.75 billion were offered to investors. The auction was oversubscribed and fully allotted for the three tenors on offer – NGN3.00 billion of the 91DTM bill (Bid-to-offer: 1.49x), NGN8.39 billion of the 182DTM bill (Bid-to-offer: 1.47x), and NGN168.36 billion of the 364DTM bill (Bid-to-offer: 2.14x) – at respective stop rates of 11.10% (previously 11.10%), 11.80% (previously 11.80%) and 13.30% (previously 12.89%).
Also, the CBN offered instruments worth NGN300.00 billion at the OMO auction, with only the 364-day instrument recording oversubscription and full allotment – NGN1.03 billion of the 91DTM bill (Bid-to-Offer: 0.02x), NGN0.05 billion of the 182DTM bill (Bid-to-Offer: 0.001x), NGN4941.40 billion of the 364DTM bill (Bid-to-offer: 2.46x).
Analysts expect increased demand in the secondary market as investors look to re-invest OMO maturities.
Coutesy: Cordros Securities