By Babajide Komolafe & Michael Eboh
The upward trend in the equities segment of the Nigerian Stock Exchange (NSE) is expected to continue this week, as investors take position in anticipation ofÂ full recovery in the market.
Last week, the value of investments on the NSE rose by N106.82 billion, as the market indices – the All-share index and market capitalisation both roseÂ by 1.73 per cent.
The capitalisation rose by N106.82 billion to close the week at N6.290 trillion from N6.183 trillion at which it opened the week, while the index closed at 25,861.93 points from 25,422.79 points at which it opened the week.
The expected recovery in the market will be driven by investorsâ€™ decision to take position in a number of stocks following the low prices of majority of the blue chip companies.
Another factor that is expected to drive the market is the anticipated return of stability in the global financial landscape, especially in the European Union, with the euro recording significant improvement against other major international currencies, after weeks of steady decline.
It is expected that activity in the market would be driven, this week, by renewed interest in the market, as investors take advantage of the decline recorded in the past couple of days to invest in low-priced stocks.
Also, the on-going rights issue by Unity Bank Plc and Wema Bankâ€™s plan to raise N30 billion to boost its capital base, are two major developments that are expected to bring about significant improvement in transactions on the NSE, in the days ahead.
Increased activities due to new issues
An upward trend is expected in the bond market this week, as the federal government through the Debt Management Office (DMO) is set to issue N80 billion in form of bonds in the fixed income securities market.
The DMO is issuing a N30 billion three_year bond, N50 billion five_year bond and N20 billion 20_year bond. According to the offer circular, the bonds will be sold at N1,000 per unit subject to a minimum subscription of N10,000 and in multiples of N1,000 thereafter.
The offer, according to the DMO, is to open June 23, 2010, while settlement date is June 25, 2010.
Also, plans by UACN Property Development Company Plc to raise N30 billion from the corporate bonds market, in form of a convertible bond facility and which would be conducted through a book_building process, is expected to bring about a significant improvement in the bond market, especially in the inactive corporate bond segment of the market.
Last week,Â the Over_the_Counter market for Federal Government of Nigeria (FGN) bonds recorded increased patronage as turnover rose toÂ 257.51 million units valued at N280.91 billion was recorded in 2,452 deals, fromÂ 231.73 million units valued at N261.25 billion in 2,330 deals.
The 7th FGNÂ Bond 2013 Series 1 enjoyed the most patronage in the sector, trading 57.7 million units valued at N56.47 billion in 534 deals. It was followed by the 6th FGN Bond 2029 Series 5 with the exchange of 31.9 million units valued at N31.74 billion in 250 deals.
Of the 37 FGN bonds available, 27 enjoyed investorsâ€™ patronage compared with 24 in the preceding week.
Meanwhile, there were no transactions in the Federal Government Development Stocks, State Government Bonds and Industrial Loans/Preference Stocks sectors.
The declineÂ in value of mutual
funds listed on the Memorandum Quotations segment of the Nigerian Stock Exchange (NSE) is expected to ease slightly this week, as fund managers re_strategise to deliver impressive returns on investment for investors ahead of the end of the present quarter. Of the 26 mutual funds in the sector, four recorded upward price movement, 12 recorded significant price decline, while 10 closed flat.
Naira to stabilize
The naira is expected to
stabilize this week or further appreciate following indication that the Central Bank of Nigeria (CBN) will meet all foreign exchange demand.
Last week, the apex bank increased foreign exchange supply through the Wholesale Dutch Auction System (WDAS) sessions by 17 per cent to $700 million from $600 million the previous week. However, foreign exchange demand fell by 9.6 per cent to $657.176 million from $726.280 million. As a result the official exchange rate dropped to N148.7 per dollar from N149 per dollar the previous week, indicating 30 kobo appreciation for the naira in the official market.
But, the naira depreciated by 22.25 kobo at the interbank market as the interbank rate rose to N151.5475 per dollar from N151.325 per dollar due to what interbank sources attributed to speculative trading. During the week three oil firms namely Chevron, Addax and Shlumberger boosted foreign exchange supply by about $55 million.
Cost of funds to remain low Interbank interest rates are expected to remain low this week due to buoyant liquidity position of the market occasioned by the inflow of statutory allocation funds last week.
The inflow of funds caused interest rate to fall sharply in the market with Call lending rate falling to 1.19 per cent from 6.12 while Seven Days and 30 Days lending dropped to 2.5 and 4.75 per cent from 6.95 and 7.75Â per cent respectively.