Afrinvest Weekly Update | Domestic Equities and Fixed Income Round Up
An Extraction of the Afrinvest Weekly Economic & Market Report for January 12, 2024
Photo Credit: NGX
At the end of the trading week, the NGX-ASI advanced further by 4.2% to 83,042.96 points – a new historic milestone. Resultantly, market capitalisation firmed up by ₦1.8tn to ₦45.4tn while YTD return improved to 11.1% (previously 6.6%). Also, activity level improved as average volume and value traded strengthened by 38.5% and 72.2% w/w to 600.6m units and ₦9.0bn, respectively. The top traded stocks by volume were TRANSCORP (591.2m units), FCMB (360.5m units), and FIDELITY (329.6m units), while UBA (₦8.6bn), ACCESCORP (₦8.2bn), and TRANSCORP (₦8.0bn) led in terms of value.
Across our coverage sectors, performance was upbeat as four indices gained while two lost. Setting the pace, the Consumer Goods and Insurance indices advanced 9.6% and 7.6% w/w respectively, driven by buying interest in BUAFOODS (+15.5%), UNILEVER (+16.2%), ROYALEX (+21.0%), and AIICO (+8.7%). Following, the Banking and Industrial Goods indices improved 6.8% and 4.8% w/w respectively, fuelled by price appreciation in GTCO (+8.9%), WEMABANK (+18.8%), WAPCO (+15.4%), and DANGCEM (+7.7%). On the flip side, the Oil & Gas and AFR-ICT indices declined 1.6% and 0.3% w/w respectively, owing to profit taking on TOTAL (-10.0%) and MTNN (-0.7%).
Investor sentiment, as measured by market breadth, weakened to 0.9x from 1.4x the prior week as 73 stocks gained, 23 lost, while 56 remained unchanged. Top gainers of the week were CADBURY (+42.3%), VERITASK (+39.5%), and JBERGER (+32.9%), while DAAR (-30.2%), TOTAL (-10.0%), and NEM (-9.4%) led the laggards. Barring any positive catalyst, we anticipate a dominant profit-taking swing in the next trading week due to weakening investor sentiment.
Foreign Exchange Market: Weaker Naira Across Windows
The escalation of tensions in the Middle East triggered the diversion of tankers to avoid the Red Sea transits – mounting supply side pressure on oil prices. As such, brent crude price rose 0.4% w/w to $79.11/bbl. Meanwhile, on the home front, the CBN's external reserves rose by 6bps w/w to $33.1bn (as at 10th of January 2024).
At the Investors & Exporters Window, the activity level rose 56.1% w/w to $551.8m. In the currency market, the base currency (Dollar) appreciated 2.4% w/w against the price currency (Naira) in the NAFEM window to ₦890.54/$1.00. Likewise, in the parallel market segment, the USD strengthened 2.5% w/w against the Naira to ₦1,245.00/$1.00. In the coming week, we expect the pressure on the Naira to remain potent due to the lingering FX supply-demand imbalance.
Bonds Market: Bulls Hold Sway
Bulls extended dominance in the domestic space, compressing the average yield across tenors by 40bps w/w to 13.1%. Specifically, the average yield across the short, mid, and long dated instruments contracted 57bps, 26bps, and 37bps w/w respectively on the back of buying interest in the MAR-2024, JUL-2030, and APR-2037 instruments.
Elsewhere, the SSA Sovereign Eurobonds market closed positive as improved sentiment depressed the average yield by 1.5ppts w/w to 23.2%. Notable buying interest was witnessed on Kenya’s 2024 and Ghana’s 2026 instruments where yield declined 162bps and 160bps w/w respectively. The interest on Ghana’s Eurobond note was motivated by market optimism on the receipt of the draft term sheet on debt relief from its official creditors which sets the stage for the IMF to disburse $600.0m. Similarly, the Corporate Eurobonds market closed in the green with yield decline of 13bps w/w to 8.8%. The bullish performance was supported by buying interest on the ACCESS BANK PLC 2026 and EBN FINANCE CO BV 2026 as yield decreased 68bps and 33bps w/w to 9.4% and 11.1%, respectively.
In the coming week, we expect mixed sentiment on the domestic market to be driven by FGN bond coupon payment of ₦65.36bn and the anticipation of the Q1:2024 FGN Bond Auction Calendar. For the SSA market, we anticipate a positive performance amid reforms in key markets.