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EQUITIES: Capital appreciation to continue BONDS MARKET: Uncertainty as DMO sells N70bn

By Babajide Komolafe and Michael Eboh

EQUITIES:Capital appreciation to continue

The upward trend recorded in the market is expected to continue this week as investors’ interest heightens in the capital market, ahead of the passage of the Asset Management Company’s (AMC) bill into law by the national assembly.

Investors in the Nigerian capital market gained N292.84 billion last week, as the  market capitalisation, representing the value of their investments on the Nigerian Stock Exchange (NSE), appreciated last week by 5.3 per cent.

The capitalisation closed the week at N5.813 trillion from N5.521 trillion at which it opened, while the index garnered 1,217.81 basis points to close at 24,141.72 points from 22,923.91 points at which it opened.

Indications emerged last week, that the AMC bill is set to become law, after it passed the second reading at the Senate and was passed by the House of Representatives.

The bill has been referred to the Senate Committee on Banking, Insurance and Other Financial Institutions, to work with House Committee on Capital Market and Finance. The committees are expected to conduct a public hearing and report to the Senate within a maximum period of four weeks.

The bill will  now pass through the third and final reading at the Senate, preparatory to its final passage into law, after endorsement by the Executive arm of government.

The passage of the bill and subsequent setting of the AMC is expected to  buoy activities in the capital market as the issue of bad debts recorded by banks through investment in the market via margin lending will be addressed.
Another major boost for the equities’ market is the recent partnership between the NSE and Thomson Reuters, for the latter to transmit live data from the NSE to the global investing community.

According to Mr. Busisa Jiya, Thomson Reuters’ Senior Company Officer (SCO) Africa, in a statement presented by the NSE, last week, noted that the live data feed has made the NSE one of the most sought after markets in the world, adding that it has also increased equity trading opportunities for Thomson Reuters global clients.

The transmission of live data from the NSE, will heighten the interest of investors, both locally and internationally, thereby increasing the level of activity in the market.

The NSE, in the statement signed by Mr. Sola Oni, Assistant General Manager, Corporate Affairs, stated that officials of Thomson Reuters, led by Jiya will be visiting its trading floor to interact with operators in the capital market, as parts of arrangements to celebrate the information partnership that gave birth to live broadcast of NSE’s market data on Reuters’ system, last December.

Uncertainty as DMO sells N70bn
A cloud of uncertainty hangs over the secondary bond market as fresh inflow of funds from statutory allocation and excess crude account are expected to hit the market. Also is the N70 billion bond offer by the Debt Management Office (DMO) on Wednesday. The bond market was generally bearish for most part of last week only to experience some bullish activities at the end of the week. Generally  FGN bonds recorded a significant decline in prices due to profit taking by investors which led to heavy selling in the market. Investors traded 312.1million units worth N404.68 billion in 3,076 deals, in contrast to the previous week’s turnover of 531.23 million units valued at N640.31 billion in 6,087 deals.

As in the preceding week, the most active bond by turnover was the 6th FGN Bond 2029 Series 3, with a traded volume of 67.05 million units valued at N101.16 billion in 592 deals.
This was followed by the 6th FGN Bond 2019 Series 4 with a traded volume of 45.0 million units valued at N48.72 billion in 381 deals.
Of the available 38 FGN Bonds, only 20 were traded during the week, compared to 22 in the preceding week.

Mutual Funds

Mutual funds listed on the Memorandum Quotation sector of the Nigerian Stock Exchange (NSE) are expected to perform better this week, especially with the bullish trend in the equities segment of the capital market.

Naira to continue appreciation
The Naira is expected to appreciate further this week in response to declining demand pressure in the foreign exchange market owing to improved supply from the Central Bank of Nigeria (CBN) and oil firms. Last week the naira appreciated by six kobo at the official segment of the market with the official exchange rate falling to N148.25 per dollar from N148.31 the previous week.

Cost of funds to fall as excess liquidity persist
Interbank interest rate would fall this week owing to further injection of funds from the statutory allocation and excess crude account. The fresh injection is expected to increase the excess liquidity in the market to over N500 billion from N336 billion at the close of business last week.
Last week withdrawal of N71 billion by the Nigeria National Petroleum Corporation (NNPC) caused interest rates to rise  slightly. Interest rate on Collateralised lending (OBB) rose to 1.4 from 1.05 per cent while that of Overnight lending rose to 2.0 from 1.1 per cent.


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