1st Analysis: Weekly round-up of the financial market – Emmanuel Elijah

1st Analysis: Weekly round-up of the financial market – Emmanuel Elijah

 

 

Earlier in the week ended July 5th 2019, we saw the conclusion of the G20 meeting evolving a truce between Xi Jinping and Donald Trump. Both presidents found a middle ground to return to the negotiating table.

As a show of good faith, the President of the U.S de-escalated anticipatory tariff on Chinese goods. Further, Trump lifted the embargo placed on some American companies from trading with Huawei.

 

 

1st Analysis: Weekly round-up of the financial market – Emmanuel Elijah

 

 

On his part, the President of China promised to purchase some agricultural machinery from the U.S as a sign of good faith. Going further, this is a mere truce and we do not expect this to be a consolidated deal. We have seen this level of sentiment from both parties.

However, negotiation is still skewed in either direction. We look forward to both parties shifting position to more accommodating grounds in the next weekly round-up. Nevertheless, this isn’t coming in near terms

 

ALSO READ: Global financial economy remains fragile, buffeted by trade tensions

 

In the Energy Market, Brent found support in the truce between US and China. This is due to the anticipatory impact of global growth, should both parties find a long-term resolution. However, the continued relationship between OPEC, Russia and other non-OPEC oil producing nations in an alliance known as OPEC+ did not yield the desired effect on oil prices.

At the start of the week, OPEC+ reached an agreement to extend production cut going into 2020. This was with the aim of reducing supply glut and supporting price. This did not pass well for market players. Indeed, traders of the black oil priced down oil futures to the region of $63pb from about $66pb with which it opened the week. Most traders feel the cut is not enough to reduce supply glut in the market. Hence, the lower pricing of oil futures.

To further empower Small and Medium Enterprises (SMEs) and other players in the economy, the Central Bank of Nigeria (CBN) has mandated banks in the country to give out 60% of deposits as loans.

 

1st Analysis: Weekly round-up of the financial market – Emmanuel Elijah

 

 

The directive was contained in a letter to banks signed by the Director of Banking Supervision, Ahmad Abdullahi. According to the apex bank, non-compliant banks would have their cash reserve ratios increased.

 

Earlier in the week, the National Bureau of Statistics (NBS) published the capital importation data. The data released was for the first quarter of 2019. Despite the apprehensions that met the February general election and its eventual conduct in Q1-2019, data indicate that total capital imported into the country surged 34.6% y/y to settle at $8.5bn. As a matter of fact, this is the highest since Q3-2013.

 

 

1st Analysis: Weekly round-up of the financial market – Emmanuel Elijah

 

 

 

 

Data shows that across the three components of capital imported, Foreign Portfolio Inflows (FPIs) accounted for the bulk of expansion. This spurred 56.5% y/y to $7.1bn. Foreign Direct Investments (FDIs) and Other Investments remained submissive, sliding 1.3% y/y and 26.5% y/y to $243.4mn and $1.1bn respectively.

 

ALSO READ: Financial Flow From Oil, Gas Sector Reduced To $17.05b In 2016 – NEITI

 

A profounder probe into the sections relay that foreign interests concentrated in Money Market Instruments surged 67.9% y/y to $5.9bn. This single-handedly contributed 69.8% to total capital imported into the country, as carry traders continue to relish the attractive return on government bills.

 

 

 

 

Weekly Round-up: Chart

 

 

 

 

 

 

Weekly Round-up: Bears retain dominance at the equity market

In the week ended July 5th 2019, All Share index (ASI) traded bearish all five trading days of the week to close at 29,270.95 basis points. This indicates a decline of 2.32%.

The ASI measures the movement in the Nigeria equity market.

 

Chart 2 - Weekly Round-up

 

Market capitalization which tracks the value of the entire market settled at N12.901 trillion. This shows a depression by 2.32% worth about N305 billion. However, Volume and Value traded for the week spiked marginally.

 

Chart 3: Weekly Round-up

 

Volume for the week was higher by 20.13%. On the other hand, value declined by 66.13% to close the week at 298 million trades valued at N1.8 billion. In terms of gainers for the week, CEMENT CO NORTHERN NIGERIA topped the gainers chart. It gained 15.5% for the week to settle at N15.25k. This was followed by LAFARGE AFRICA, appreciating 14.17% to close at N13.7k.

Meanwhile, CUTIX spurred by 10.00% to close the week at N1.54k, closely trailed by CONOIL closing at N23.8k appreciating 9.93%. FLOUR MILLS NIGERIA spiked by 7.14% to close the week at N15.00k.

At the other end of the table, we have the losers led by MUTUAL BENEFIT ASSURANCE shedding 13.04% to close at N0.2k. GUARANTY BANK followed, shrinking 11.85% to close at N29.0k. PRESCO depreciated by 10.00% to close at N46.8K while FIDSON HEALTHCARE plunged to N4.55k, representing a decline of 9.90%. LIVESTOCK FEEDS PLC closed at N0.48k, plummeting by 9.43%.

 

 

Chart 4: Weekly Round-up

 

 

On sectoral front, the NSE Banking Index closed 5.44% lesser to close at 366.87 basis points. The NSE Industrial Goods Index spiked to close at 1,087.80 basis points for the week representing 3.28% gains. The NSE Oil and Gas Index shrunk marginally for the week by 0.75% to print 253.23 basis points while the NSE Consumer Goods Index depreciated by 2.84% to close at 622.33 basis points.

This week, we do not see a drastic change in trading pattern in the absence of a catalyst to drive the market. However, market players anticipate policy guidance and cabinet formation by the new administration to gauge opportunities and direction.

 

CBN cracks down on liquidity

The apex bank on Monday held an Open Market Operation (OMO) of bills worth over N400 billion. Bid to cover ratio was highly skewed towards the long end of the offer.  In an aggressive move towards liquidity, the Central Bank on Tuesday offered bills worth N400 billion via OMO. However, “No Sale” result was published.

 

 

1st Analysis: Weekly round-up of the financial market – Emmanuel Elijah

 

 

The scheduled rollover of maturing T-bills held on Wednesday. The DMO rolled over bills worth N88.8 billion across three maturities. For this, 91-day sold for 10.5% representing 90bps hike, 182-day sold for 11.7% and the 364-day sold for 11.9% with a total bid to cover ratio of 5.4x.

We saw yet another OMO on Thursday, due to persistent system liquidity, selling a bill worth N264 billion.  Rates on the 112- and 266-day bills offered remained unchanged at 11.40% and 11.84%, with all subscriptions met. Further, the 364-day bill which recorded a 4.96 bid to cover ratio, cleared 15bps lower at 12.25%.

System liquidity remained relatively robust for the week due to FAAC hitting the banks, bond maturities and coupon payments thereby moderating the Open Buy Back (OBB) and overnight rates (O/N) rates marginally by 3.5% and 1.5% to close at 3.86% and 4.57 respectively due to elevated system liquidity. Going further, average treasury bills (T-bills) yield for the week plunged by 151bps to settle at 11.94% vs 12.12% the prior week with sell pressure noticed around APR, MAY 2020 bills. In the bond space, averaged yield dipped by 153bps to close at 13.04 vs 13.24 prior week. This was driven by buyer sentiment witnessed across the 2022 maturities.

Moreover, Investor sentiment continues to be largely positive at the fixed income space.

 

Lilian Osigwe

DATABASE MANAGER/ WRITER at 1STNEWS
Osigweh Lilian Oluchi is a graduate of the University of Lagos where she obtained a B.A (Hons) in English, Masters in Public and International affairs (MPIA). Currently works with 1stnews as a Database Manager / Writer.





lilian.osigweh@1stnews.com
Lilian Osigwe

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