Financial Market Watch …for the week ended June 23, 2017

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Local economy news

Freshly released real sector data by the National Bureau of Statistics showed that Nigeria’s National Disposable Income at 2016 purchasers’ value increased year-on-year by 3.89 per cent (and quarter-on-quarter by 12.35 per cent) to N19.15tn in Q3 2016.

The y-o-y increase in the NDI resulted from improvement in primary (factor income) and secondary income (transfers) from abroad.

Specifically, “Other current transfers from the rest of the world” spiked y-o-y by 75.68 per cent to N2.52tn; “compensation of employees from the rest of the world” increased y-o-y by 54.03 per cent to N25.96bn; while “property & entrepreneurial expenses to the rest of the world” (i.e. income paid to foreigners) declined y-o-y by 49.43 per cent to N97.15bn. These offset a 5.04 per cent y-o-y decrease in “net taxes on products” to N220.53bn and a 2.71 per cent y-o-y decline in “domestic factor income” to N16.48tn of which “operating surplus” declined y-o-y 0.98 per cent to N12.94tn and “compensation of employees” fell y-o-y by 8.55 per cent to N3.54tn.

In the review period, real the GDP measured by expenditure approach showed that the Domestic Absorption–comprising final consumption by households, general government plus net investments by corporations – decreased year-on-year by 4.77 per cent to N13.58tn.

Equity market-listed securities on NSE

The Nigerian equity market succumbed to profit-taking activities by investors as the twin market indicators slumped, surrendering the gains garnered in the previous trading weeks.

Consequently, the NSE ASI and Market Capitalisation depreciated significantly by 4.99 per cent (499 basis points) week-on-week to close at 32,122.14 points and N11.107tn respectively. With this, the NSE ASI has now delivered a positive YTD return of 19.53 per cent

In a related development, Conoil Plc (12 months, December 2016) recorded a 28.53 per cent increase in gross earnings to N24.47bn and recorded N173.00m in profit after tax representing a 118.38 per cent increase from the previous period.

This week, we expect a mix of profit taking and bargain hunting activities amidst improved investors confidence

NASD –Unlisted securities

The northward trek in the key performance indicators of the NASD OTC market continued as the twin market indicators closed on a promising note. Consequently, the Unlisted Securities Index and Market capitalization appreciated significantly by 1.73 per cent to close the week at 654.42 points and N442.87bn, respectively.

Money market

The OBB and Overnight rates opened the week at 30.00 per cent rose to 70 per cent and eased at the end of the week to close at nine per cent due to OMO maturities.

During the week, FAAC met and approved N462.359bn for the month of May.

In the coming week, rates may nosedive slightly as FAAC inflow of approximately N462.359bn is expected to hit the system. We also expect the CBN to mop excess liquidity by way of OMO auction

Treasury bills market

It was a relatively quiet week in the treasury bills space with yields trading sideways across the short and mid dated maturities. The week started with some sell off on the short dated papers (July 2017), however it closed with a rally on the mid dated papers following the credit of OMO maturities of approximately N152.00bn to the system on Thursday. On the average, yields on the short and mid-dated papers closed at 17.30 per cent & 18.10 per cent from last week’s levels of 18 per cent & 18.50 per cent. There was very little activity on the long dated papers, which closed at 18. 50 per cent.

In the just concluded week, the Central Bank of Nigeria auctioned treasury bills via primary market, viz: 91-day bills worth N28.122bn (Stop Rate, SR, fell to 13.499 per cent from 13.50 per cent) 182-day bills worth N43.837bn (SR rose to 17.50 per cent from 17.30 per cent) and 364-day bills worth N61.287bn (SR fell to 18.6499 per cent from 18.6899 per cent) which outstripped inflows via matured treasury bills worth N104.679bn.

With anticipated FAAC inflows of approximately N462.359bn and OMO maturities of N236.00bn hitting the system next week, the rally on the short and mid dated papers should persist. However, we also expect an aggressive mop up stance by the CBN to maintain an optimal level of money supply.

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