Tuesday, February 27

Comercio Partners weekly markets round-up

Global Events

As both delta and omicron variants sweep through the world with cases in nations like the U.S. averaging new record highs, emerging data from South Africa has revealed that people who are infected with omicron develop an immune response that increases protection against the delta strain by over fourfold. Whilst the new Covid-19 study from South Africa is yet to be peer-reviewed, it has however contributed to the slight dousing of Covid-19 fears.

Elsewhere, China’s real estate giant, Evergrande, missed another coupon payment this week totaling US$255 million. The company remains submerged in liabilities north of US$300 billion, with an estimated US$19 billion in cross-default due to its failure to make coupon payments earlier this month. Hence, concerns around the debt problems of the company alongside the possibility of a contagion effect across China’s real estate industry, are closely weighed against the likelihood of some sort of bailout support program from a reluctant Chinese government.

Back at home, President Muhammadu Buhari signed the 2022 Appropriation bill of N17.126 trillion into law, reflecting an increase of over N700 billion relative to budget initially proposed by the president. However, the crude oil price assumption was increased from US$57 to US$62 per barrel.

Money Markets

Multiple SLF inflows bolstered liquidity level this week, causing interbank rates to decline. The Open Buy Back (OBB) and Overnight (O/N) rates each fell by 2.00% to 10.00% and 10.50%, respectively.

We expect the relatively stable liquidity level to cause interbank rates to decline next week.

Treasury Bills

The treasury bills market was relatively quiet this week, with minimal volumes traded across board. Average benchmark yield remained unchanged at 4.44%.

We expect the market to remain tepid next week.

Bond Market

The local bond market sustained a seesaw trading pattern this week, with interests seen across selected maturities. Average benchmark yield fell by 1bp to 11.86%.

We expect the current trend to persist in the interim.

Eurobond Market

Reduced omicron fears, as well as an uptrend in oil prices, sponsored a bullish bias in the Eurobond market for most of the week. Average benchmark yield declined by 13bps to 7.20% week on week.

We anticipate a less aggressive bullish bias next week, should positive news around omicron hold sway.

FX Market

The Naira depreciated sharply against the US Dollar by 457bp to $1/₦435.00 at the Investors and Exporters FX Window this week. The prevailing FX crisis has now forced the NAFEX rate to soar to a new record high.

Equities Market

Bulls dominated proceedings in the last trading week of the year, as investors cautiously cherry-picked attractively priced stocks. At the close of the market today, the benchmark index was up by 1.07% week on week, to close at 42,716.44 points. Year-to-Date return settled at 6.07%, while the Market Capitalisation stood at ₦22.30 trillion. Likewise, investor sentiment as measured by the market breadth closed positive at 1.50x on the back of 33 advancers and 22 decliners.

Volume declined by 0.77%, while value traded advanced by 15.36%, respectively, on a week-on-week basis. The most traded stocks by volume were FBNH (99.84 billion units), ZENITHBANK (87.19 million units) and ACCESS (70.61 million units), while NESTLE (₦4.82 billion), ZENITHBANK (₦2.20 billion) and FBNH (₦1.13 billion) topped the value chart for the week.

We expect to see improved interests next week, as investors position themselves ahead of the full year earnings and dividend season.