Afrinvest Weekly Update | Domestic Equities and Fixed Income Round Up
An Extraction of the Afrinvest Weekly Economic & Market Report for January 19, 2024
Photo Credit: NGX
Strong buy sentiment drove the biggest weekly gains on the domestic bourse in nine years, as bulls pushed the NGX-ASI higher by 13.8% to a record 94,538.12 points. As a result, market capitalisation improved ₦6.3tn to ₦51.7tn while YTD advanced to 26.4% (previously: 11.1%). Activity level declined w/w as average volume and value traded tempered 10.9% and 26.0% to 1.0bn units and ₦13.1bn respectively. TRANSCORP (362.9bn units), JAIZBANK (338.8bn units), and AIICO (251.9bn units) were the top traded stocks by volume for the week while TRANSCORP (₦6.3bn), NASCON (₦5.2bn), and ZENITH (₦4.8bn) led by value.
Across our coverage sectors, weekly performance was positive as five indices gained while the Banking index lost 0.1%. Leading the gainers, the Industrial Goods and Insurance indices rose 46.9% and 14.9% w/w following strong upswing in DANGCEM (+53.9%), BUACEMENT (+45.8%), and NEM (+39.1%). Price appreciation in SEPLAT (+10.0%), ETERNA (+38.3%), and DANGSUGAR (+17.3%) pushed the Oil & Gas and Consumer Goods indices up 8.8% and 8.2% sequentially. Also, the AFR-ICT index rose 1.1% w/w, buoyed by price rally in MTNN (+2.5%).
Investor sentiment, as measured by market breadth, strengthened to 1.1x from 0.9x in the prior week as 79 stocks gained, 16 lost while 57 were unchanged. The top performing stocks for the week were DANGCEM (+53.9%), HONYFLOU (+50.8%), and MAYBAKER (+50.5%) while ROYALEX (-22.4%), IKEJAHOT (-10.6%), and LINKASS (-8.2%) were the top underperforming stocks. Next week, we expect the positive sentiment to linger albeit at a softer price, moderated by profit-booking. Hence, we advise cautious entry and equity selection based on fundamentals
Foreign Exchange Market: Naira Falters Across FX Segments
This week, brent crude oil price inched higher by 1.6% w/w to close at $78.48/bbl. amid escalating tension in the Middle East and oil output disruptions in the US. Relatedly, the International Energy Agency (IEA) revised its 2024 demand forecast upward to 1.24mbpd. Meanwhile, on the domestic front, Nigeria’s foreign reserves gained 41bps w/w to $33.2bn (16th of January 2024).
Across the FX market, the Naira continued to face increased pressure due to the demand-supply imbalance. In the NAFEM window, the USD appreciated by 1.3% w/w against the Naira to ₦902.45/$1.00. Also, activity level fell 33.3% w/w to settle at $505.8m. At the parallel market, the dollar gained 7.6% w/w against the Naira, reaching ₦1,340.00/$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 Performance Weighs on Domestic Trade
Yields in the secondary FGN bond increased, as sell pressure dominated in three of five trading sessions. Consequently, the average yield across tenors rose 19bps w/w to average 13.3%. The bearish bias – was most notable at the medium-term segment, where average yield rose 57bps. Trailing, yields on the short and long ends widened by 7bps and 3bps respectively.
The average SSA sovereign Eurobonds yield rose 0.2ppts w/w to 25.4%, skewed by yield uptick of 12.0ppts and 0.4ppts in the Zambia and Senegal 2024 instruments. The performance masked positive sentiment in the region. Notably, Ghana secured moratorium with official creditors to delay debt payments till May 2026, advancing debt restructuring efforts and paving the way for additional disbursements from the IMF. Likewise, the fund announced intention to disburse $684.7m to Kenya which would support liquidity ahead of key Eurobond repayment. The positive news inspired bullish sentiment in the highlighted markets.
Conversely, the average yield on Corporate Eurobonds contracted 9bps w/w to 8.8% due to positive outing in FIDELITY BANK 2026 (-67bps) and ESKOMS HOLDINGS 2025 (-37bps) instruments. Next week, we expect average yield in the domestic bond market to temper due to robust system liquidity. Conversely, we see the accompanied positive perception towards Ghana and Kenya's debt restructuring strides to lift sentiment in the SSA market.