Market Watch …for the week ended March 10, 2017

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Local economy news

The Federal Ministry of Budget and National Planning launched the much anticipated Economic Recovery and Growth Plan. Under the ERGP, the Federal Government intends to implement structural and macroeconomic reforms in a collaborative effort between monetary and fiscal authorities in order to stimulate real sector activities and enhance economic growth. Given the need for economic diversification, the structural reforms are intended to result in substantial increase in public and private investments, especially in sectors with comparative and competitive advantages.

They seek to reduce obstacles to doing business, privatise selected public enterprises, fast-track the provision of high-quality infrastructure and promote social inclusion. In addition, the ERGP seeks to promote non-oil exports through the zero-oil plan and use trade policy tools to tackle dumping and balance of payments crisis, and to raise non-oil exports as a ratio of total exports from 7.5 per cent to 15 per cent by 2020.

Hence a strong annual GDP growth rate of 4.62 per cent is expected from 2017 to 2020, driven by strong non-oil sector growth (7.28 per cent by 2020) and steady expansion of the agriculture, manufacturing and services sectors in a stable macroeconomic environment with low inflation, stable exchange rates and sustainable fiscal and external balances with improved employment rate.

Equity market: Listed securities on NSE

Equities on the Nigerian Stock Exchange recorded an overall bullish week as the key performance indicators firmed higher. Week-on-week, the NSE All-Share Index and market capitalisation appreciated marginally by 0.90 per cent (week-on-week) to close at 25,238.01 points and N8.734tn, respectively. With this, the NSE ASI has now delivered a year-to-date return of -6.09 per cent.

A turnover of 1.024 billion shares worth N12.464bn in 16,400 deals were traded in the past week by investors in contrast to a total of 1.387 billion shares valued at N13.726bn that exchanged hands in the previous week in 15,422 deals.

On the sidelines of trading activities, Guaranty Trust Bank Plc (12 months to December 2016) recorded a 37.36 per cent increase in revenue to N414.62bn and a 33.03 per cent increase in profit after tax to N132.28bn. The commercial bank also declared a cash dividend of N1.75 a share, which translates to a yield of 7.14 per cent based on a share price of N24.50 as of Friday, March 10, 2017.

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Access Bank Plc (12 months to December 2016) also recorded a 13.02 per cent increase in gross earnings to N381.32bn and a 8.46 per cent increase in profit after tax to N71.44bn. The commercial bank also declared a cash dividend of N0.40 a share, which translates to a yield of 5.98 per cent based on a share price of N6.69 as of Friday, March 10, 2017.

In this new week, we expect a mix of bargain hunting and profit-taking activities by investors.

NASD unlisted securities

The NASD OTC market retracted from the upbeat recorded in the previous weeks as the twin market gauges nosedived. Consequently, the Unlisted Securities Index and market capitalisation depreciated marginally by 0.17 per cent to close the week at 611.43 points and N413.77bn, respectively.

Money market

The interbank market eased slight across board on improved system liquidity.

In the new week, we expect a likely increase in money market rates on liquidity drain amidst fixed income auctions comprising treasury bills and Federal Government savings bonds.

Treasury bills market

It was a relatively quiet week in the treasury bills market, which traded sideways throughout the week. An initial bout of demand was seen on the June 2017 papers. However, the volatility of the liquidity position in the interbank market reversed this bullish trend. Week-on-week, yields shed 30-40bps, closing at 17.40 per cent levels from 17.80 per cent last Friday.

This week, there will be treasury bills auctions worth N213.763bn via primary market, viz: 91-day bills worth N39.006bn, 182-day bills worth N48.453bn and 364-day bills worth N126.304bn, which will more than offset maturing treasury bills worth N170.508bn via primary market, viz: 91-day bills worth N39.006bn, 182-day bills worth N48.453bn and 364-day bills worth N83.049bn.

We expect to see trickles of demand for bills on the short dated papers (June 2017 maturity), however, with expectation of FX and OMO auctions, we envisage some moderation in the bullish trend.

Bonds market

The past week was more active in the bonds space as the market resumed full trading activities after the previous week’s hiatus. Bond yields shed around 15-20bps week-on-week as the market reacted to the Debt Management Office’s offer circular, where it reduced the amount on offer for the 20-year paper at this week’s primary auction.

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While the volume traded was generally low, the market saw some demand for the January 2026 paper, which will no longer be re-opened at subsequent primary auctions. The January 2021 and March 2036 papers closed at 16.19 per cent and 16.33 per cent.

The DMO is offering N130bn at this month’s primary auction; we expect yields to remain flat on the long end of the curve. However, the short to mid-dated papers could trend upwards.

Exchange rates: Naira/USD

The naira was fairly stable around 465/$ at the parallel market for the week due to the Central Bank of Nigeria’s continued intervention in the interbank market.

The CBN offered $100m in a special wholesale auction and also sold dollars for invisible transactions. These interventions increased the dollar liquidity at the official market and reduced the demand for dollars in the parallel market.

The naira is expected to remain stable in both the official and parallel markets in the expectation that the central bank continues to intervene in the interbank market.

Dr. Bernard Ilori

CEO, Mutual Alliance Investment & Securities Limited

[email protected]

09030004477 (SMS/WhatsApp only)

  • Dr. Bernard Ilori, CEO, Mutual Alliance Investment & Securities Limited, [email protected] 09030004477 (SMS/WhatsApp only)

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