By Babajide Komolafe & Michael Eboh
Bulls to assume market control The decline witnessed in the equitiesâ€™ segment of the Nigerian Stock Exchange (NSE) is expected to give way to a bullish run this week.
Last week, a downward trend was recorded on the Nigerian Stock Exchange (NSE), as the indices for measuring the performance of quoted securities, the market capitalisation and All-share index both dipped by 2.25 per cent each.
In particular, the capitalisation dropped by N146.35 billion to N6.368 trillion from N6.515 trillion at which it opened the week, while the index shed 601.69 basis points to close at 26,183.21 points from 26,784.90 points at which it opened.
The decline was brought about by losses incurred byÂ of majority of the listed equities, as 73 stocks recordedÂ price decline compared to 36 with price gain.
The decline in the market last week, was occasioned by profit-taking activities, as investors took advantage of upward price movements recorded in the previous weeks to make gains.
However, the decline in the market indices eased Thursday, as the market capitalisation and All-share index bounced back to positive terrain. This was after the release of the guidelines for margin lending by the CBN and other agencies in the Financial Services Regulation & Coordinating Committee (FRSCC).
Bullish trading to deflate yields
Trading in the secondary market for FGN bonds will be bullish this week and hence decline in yields, owing to increased market liquidity
Last week,Â yield on the FGN Bond trended downward, from the first to the fourth trading day of the week – (Monday till Thursday)
as a result of liquidity injection. The trend changed, though not significant at the last trading session of the week, as yields rose across all tenors
The secondary market recordedÂ turnover of 163.1 million units valued at N178.21 billion was recorded in 1,263 deals in contrast to the previous weekâ€™s turnover of 145.8 million units valued at N171.27 billion in 1,127 deals.
The 6th FGN Bond 2029 Series 5 enjoyed the most patronage in the sector, trading 50.9 million units valued at N51.29 billion in 351 deals, the 6th FGN Bond 2019 Series 4 followed with a traded volume of 27.6 million units valued at N28.18 billion in 239 deals. Of the 39 FGN Bonds available, 19 were traded during the week, compared with 22 in the preceding week.
Mutual Funds in the Memorandum Quotations sector of the Nigerian Stock Exchange (NSE) are expected to maintain an upswing posture this week. Of the 26 mutual funds in the sector, only one enjoyed price appreciation, 10 recorded a dip in the prices while 15 remained unchanged.
Naira to maintain gains against dollar
The Naira is expected to maintain the 15 kobo gain recorded against the dollar last week occasioned by sharp drop in demand at the official market.
Foreign exchange demand fell by 26 per cent at theÂ foreign exchange auction held last week under the Wholesale Dutch Auction System (WDAS) by the Central Bank of Nigeria (CBN). From $1.005 billion the previous week, demand fell to $743.031 million. As a result the amount sold by the apex bank fell by 17.4 per cent to $743.031 million from $900 million, indicating the apex bank met all demand. Consequently the official exchange rate dropped to N148.78 per dollar from N148.93 per dollar, indicating 15 kobo appreciation.
The naira remained stable at the interbank market with the interbank rate closing the week at N151.7 per dollar, slightly lower thanÂ the N151.772 per dollar at the close of business the previous week. The stability of the interbank rate reflects the moderation in foreign exchange demand in the market.
Cost of funds to resume upward move Interbank interest rates will resume upward movement this week after the sharp fall of last week occasioned by the inflow of statutory allocation excess crude account funds.
The release of N228 billion statutory funds and N186 billion excess crude account funds last week to the three tiers of government revived liquidity in the market and deflated interbank interest rate. Interest rate on Call lending crashed to 1.27 from 7.08 per cent the previous week, while Seven Days lending fell to 2.5 from 8.58 per cent. From 9.42 the previous week, interest rate on 30 Days money fell to 5.4 per cent.
However, the liquidity relief occasioned by the inflow is expected to be short lived due to out through foreign exchange purchases, purchase of treasury bills and FGN Bonds. These expected outflow would impact severely on market liquidity and hence exert upward pressure on cost of funds.