Afrinvest Weekly Update | Domestic Equities and Fixed Income Round Up
An Extraction of the Afrinvest Weekly Economic & Market Report for January 26, 2024
Photo Credit: NGX
The local bourse ended the week on a positive note as NGX-ASI saw a gain of 8.3% to print at 102,401.88 points, lifting the YTD return to 36.9%. As a result, market capitalisation increased ₦4.3tn to ₦56.0tn. Meanwhile, activity level dampened as average volume and value traded declined by 42.4% and 25.6% w/w to 519.4m units and ₦11.6bn respectively. The top traded stocks by volume were TRANSCORP (273.5m units), UBA (178.8m units) and ACCESSCORP (128.9m units), while UBA (₦5.4bn), DANGSUGAR (₦5.1bn) and TRANSCORP (₦4.7bn) led in terms of value.
Across our coverage sectors, performance was positively skewed as four indices gained, while the other two lost. The Industrial and Oil & Gas indices advanced 23.2% and 11.6% w/w respectively driven by buying interest in DANGCEM (+28.8%), BUACEMENT (+21.0%), SEPLAT (+21.0%) and ETERNA (+19.6%). Also, the Consumer Goods and AFR-ICT indices rose 5.3% and 0.6% w/w respectively due to price appreciation in BUAFOODS (+13.3%), NASCON (+8.5%) and MTNN (+1.3%). On the flip side, the Insurance and Banking indices declined 4.1% and 1.6% w/w respectively due to sell pressure on CORNERST (-15.5%), AIICO (-11.3%), UNITYBNK (-16.6%) and JAIZBANK (-15.1%).
Investor sentiment, as measured by market breadth weakened to -0.3x from previous weeks’ 1.1x as 34 stocks gained, 54 lost and 64 closed flat. Top gainers for the week were TRIPPLEG (+32.2%), DANGCEM (+28.8%) and SUNUASSU (+25.0%), while VERITASK (-23.4%), CADBURY (-20.9%) and DEACAP (-19.2%) led the laggards. In the coming week, we anticipate market performance to be driven by positive sentiment.
Foreign Exchange Market: Naira Trades Mixed Across FX Segments
This week, brent futures strengthened by 4.6% w/w to trade at $82.41/bbl. buoyed by China’s 1.0tn yuan ($139.8bn) stimulus plan and disruptions to US production owing to cold weather, even as the Middle-east and Red sea conflicts linger. On the domestic front, Nigeria’s foreign reserves gained 0.2% w/w to $33.4bn (23rd of January 2024).
Across the FX market, the performance of the Naira diverged with mild recovery in the official market. Precisely, the Naira gained 1.2% w/w against the USD to settle at ₦891.90/$1.00. Meanwhile, activity level fell 3.5% w/w with weekly turnover closing at $488.2m. At the parallel market, the Naira shed 4.6% w/w against the greenback at ₦1,405.00/$1.00 at the close of trading. Next week, we expect the naira to remain pressured across FX segments due to CBN constrained capacity to significantly boost supply.
Bonds Market: Bearish Sentiment Prevails in Domestic Bonds Market
The bearish sentiment in the domestic bonds market persisted this week, as investors take short positions ahead of the January 2024 bond primary auction. As a result, the average yield across tenors rose 23bps w/w to 13.5%. Across the term structure, the long-dated instruments recorded the most selloffs as the average yield advanced 39bps. Similarly, the average yield on the short and medium-dated instruments expanded 11bps and 10bps respectively w/w.
Bearish sentiment dominated the SSA Eurobonds market, recording an uptick of 1.3% w/w to 26.7%. Notably, Zambia 2024 and Ghana 2025 recorded the most sell-off as the average yield rose 24.7ppts and 7.9ppts w/w respectively. Conversely, the Corporate Eurobonds market closed slightly positive with a yield decline of 4bps w/w to 8.7%. The bullish performance was supported by buying interest on the FIDELITY 2026 and ECOBANK 2024 instruments as yield decreased 23bps and 21bps w/w to 10.1% and 8.9%, respectively.
In the coming week, the DMO has scheduled FGN bond sales of up to ₦90.0bn each on the MAR 2027, APR 2029, JUN 2033, and JUN 2038 re-openings. We anticipate that trading in the secondary market will be influenced by the outcome of the FGN bond auction and the expected FAAC inflow. For the Eurobond and SSA market, we anticipate a bearish performance in the absence of any significant catalyst.