Afrinvest Weekly Update | Domestic Equities and Fixed Income Round Up

An Extraction of the Afrinvest Weekly Economic & Market Report for February 16th, 2024

Photo Credit: NGX

This week, significant gains in bellwether stocks – BUAFOODS (+20.8%), AIRTELAF (+10.0%), GEREGU (+33.3%) and SEPLAT (+9.6%) – supported the local bourse’s return to positive form. As a result, the NGX-ASI rose 3.8% w/w to 105,722.78 points, market capitalisation advanced ₦2.1tn to ₦57.8tn, while YTD return inched higher to 41.4% (previously: 36.2%). Activity level waned as average volume and value traded fell 36.8% and 23.5% w/w to 342.5m units and ₦8.0bn respectively. Top traded stocks by volume were VERITASKAP (108.9m units), UBA (104.1m units) and TRANSCORP (98.8m units) while GEREGU (₦4.7bn), GTCO (₦3.9bn) and UBA (₦2.6bn) led in terms of value.
 
Performance across sectors under our coverage was positive as four indices closed in the green while the other two lost. The Consumer Goods and AFR-ICT indices advanced 11.0% and 5.7% w/w respectively, due to buying interest in BUAFOODS (+20.8%), HONYFLOUR (+4.3%), AIRTELAF (+10.0%) and CHAMS (+9.2%). Similarly, the Oil & Gas and Insurance indices rose 5.2% and 2.7% w/w respectively, on the back of gains in SEPLAT (+9.6%), CORNERST (+12.1%) and MANSARD (+5.3%). Conversely, the Industrial Goods and Banking indices fell 1.8% and 1.3% w/w sequentially, owing to losses in BUACEMENT (-4.6%), WAPCO (-4.6%), ACCESSCORP (-9.1%) and ZENITHBANK (-2.8%).
 
Investor sentiment, as measured by market breadth, improved to -0.2x from -0.7x in the prior week as 34 stocks advanced, 50 declined while 68 closed flat. The top performing stocks for the week were JULI (+45.5%), GEREGU (+33.3%) and BUAFOODS (+20.8%) while MEYER (-19.0%), MORISON (-18.7%) and DEAPCAP (-14.3%) led laggards. In the coming week, we expect the market to record mild gain supported by improved sentiment and corporate earnings releases.

Foreign Exchange Market: Naira Value Pares Across FX Segments

Price of benchmark Brent crude rose 0.7% this week to $82.73/bbl, propped up by a weaker USD, speculation over potential Fed rate cuts, and OPEC's continued commitment to production cuts, though gains were capped by the IEA's downgrade of its 2024 oil demand growth projections to 1.22mbpd from 1.24mbpd.

On the domestic scene, CBN’s foreign reserve gained 0.4% w/w to $33.3bn (as of 16/02/2024). Meanwhile, activity level in the NAFEM window faltered 58.1% w/w to $1.2bn. In the currency market, the domestic currency depreciated against the USD both at the official and parallel windows. At the official window, the Naira pared 4.4% against the USD to close at ₦1,537.96/$1.00, while the pair closed trading at ₦1,625.00/$1.00 in the parallel market, implying a 9.5% w/w depreciation in the value of the local fiat. Next week, we anticipate that the Naira would remain pressured across market segments in the absence of significant inflows to boost FX liquidity.

Bonds Market: Bearish Outing Dominates Market Segments 

Yields in the secondary market appreciated this week, as sell pressure dominated all of the five trading sessions. As a result, average yield across tenors gained 60bps w/w to 16.1%. The bearish outing was more pronounced in the short-end of the curve where average yield rose 74bps. Trailing, yields on the long and mid-end bonds gained 59bps and 47bps w/w, respectively. 

Meanwhile, performance in the SSA Eurobonds market this week was bearish as average yield advanced 1.5ppts to 30.2%. This negative showing was driven by selloffs in Zambia 2024 (32.92%) and Ghana 2025 (7.06%) instruments amid concerns around the formers ability to meet April maturing obligations and ongoing debt restructuring plans in the latter. Elsewhere, the Nigerian and Kenyan bonds continued their impressive performance as ongoing reforms in Nigeria inspired buy interest, while Kenya’s move to buyback 70.0% ($1.4bn) of its international papers maturing in June also lifted market sentiment.

It was a similar story in the Corporate Eurobonds scene as average yields gained 6bps w/w to 8.6% due to yield appreciation on the EBN FINANCE CO BV 2026 (+63bps) and ESKOM HOLDINGS 2025 (+26bps) instruments. Next week, we expect yields to be guided by the outcome of the re-opening of FGN's FEB 2031 and 2034 bond papers. Elsewhere, we anticipate the selloffs in the Zambian bonds market to continue with maturity on the horizon.