Equities: With no major catalyst in view, we expect the ongoing lackluster trading on the local bourse to continue in the week ahead. However, we advise that investment opportunities are gradually emanating in fundamentally strong stocks which investors appear to be under-pricing due to the general lull in the market.
Interbank: We expect lending rates to remain at current levels in the week ahead as FAAC payments hit the system.
Treasury Bills: We do not expect a material move in the T-Bill market in the week ahead given the generally lackluster trading pattern in recent times.
Bonds: Our bias for the average bond yield is to the upside given the yield decline recorded this week and the lack of sustained buying interest. We expect traders who entered positions this week to book profits which should pressure yields higher.
Currency: The Naira should appreciate in next week as traders await Dollar sales by oil companies. That said, we continue to see the local currency trading in a narrow band, a testament of the stable macro environment.

Financial Markets Last Week

Global equity markets built on last week’s momentum after a flurry of positive economic data raised investors’ risk appetite. Impressive job data, an expansion in manufacturing activity and higher home sales records reassured U.S investors of the strengthening growth of the economy, while the minutes from the Federal Reserve’s July meeting gave reasons to believe that the central bank is in no rush to raise interest rates. Adding to the global market momentum are improved manufacturing and other economic data from Japan signaling that the economy may rebound in Q3, and this helped offset earlier pressure on Asian stocks following disappointing Chinese manufacturing data.
On Wall Street, the Dow Jones Industrial Average and S&P 500 indices had risen by 2.2% and 1.9% w/w respectively as at time of writing. Europe’s Euro Stoxx 50 and UK’s FTSE 100 indices were up 2.8% and 1.4% w/w respectively. Japan’s Nikkei was up 1.4% while the MSCI Emerging and Frontier indices had edged up by 0.7% and 0.5% w/w in that order.

Nigerian Capital Market

Equities

The equities market overcame a poor market breadth, following a negatively skewed intra-week trading and sell-downs in the Banking and Consumer Goods sectors to record a 0.45% increase in the benchmark index. The w/w return can be attributed to the bullish session witnessed on Tuesday, in which the market grew by 1.07%, that being the only positive session within week. The major driver was the increased demand in counters like MRS (8.31%), ZENITHBANK (3.35%), NB (2.48%), FO (2.30%) and DANGCEM (1.76%) that posted price declines last week. On Thursday, a 10% drop in PAT was posted in the recently released GUARANTY H1’14 results. This led to 3.40% depreciation before the close of trading on Friday. Three of the five NSE sectoral indices posted w/w gains. The Oil/Gas index led the gainers chart with 1.09% advancement while the Banking index led the losers having fallen by 0.18%.
Market breadth remained negative as 34 gainers and 42 laggards were recorded. 1.03 billion shares, worth N12.28billion were traded during the week, lower than the 1.37 billion shares, valued at N13.29billion exchanged last week. ACCESS, TRANSCORP and ZENITHBANK were the most traded stocks this week, accounting for 22% of the total volume, while NESTLE, ZENITHBANK and GUARANTY contributed 38% of the total value of transactions.

Money Market

The average inter-bank rate was volatile this week, initially rising by 126bps for the week as at Wednesday before crashing lower on Thursday and Friday to end the week down by 56bps to 12.92%. We posit that the announcement of July FAAC payment (N654.60billion) and the expected positive liquidity impact pushed the average lending rate lower towards the end of the week.

T-Bills

The average T-Bill yield declined by 6bps w/w to 10.75%. At the PMA, the CBN offered N40.65billion worth of 91-day paper and drew bids to the tune of N56.33billion. N40.65billion worth of bids was allotted at a marginal rate of 9.90%, down 10bps from the last auction. The CBN also offered N30billion worth of 182-day paper, drawing bids of N66billion. N30billion worth was allotted at a marginal rate of 10.20%, unchanged from the last auction.

Bonds

Bonds pared last week’s losses (average yield rose by 18bps) as the average yield declined by 14bps w/w to 11.50%. We suspect that the general weakness in the equities market has provided support to the bond market which may be benefitting from temporary allocations.

Foreign Exchange

The Naira appreciated across all the three currency pairs we track. It gained 9bps w/w on the Greenback to close at N162/$. At the RDAS window the CBN offered $700million this week and sold a total of $699.68million. The Naira appreciated  strongly against the Pound and Euro, adding 76bps and 121bps respectively to close the week at N268.60/£ and N214.66/€.