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2021; moving towards a positive close?

The bulls maintained their grip on the local bourse based on the recently released NGX Domestic & Foreign Investment report for October 2021. The Nigerian equities market sustained the positive sentiments as total value traded on the local bourse increased significantly. Based on the data, the total value traded rose by 80.3% m/m, to N213.1bn (US$513.3m) in October from N118.2bn (US$285.8m) in September. The increase in total transaction value was broad-based, as domestic, and foreign investors increased their participation level. In line with expectations, the Large Volume Transactions (LVTs) around FBNH and Eterna, with a few investors buying large volumes to take a seat at the table, drove the increase in activity levels. Also, the release of impressive 9M 2021 results, accompanied by favourable dividend declarations, proved supportive. Notably, the benchmark index, All Share Index (ASI), moved into positive territory, recording a YTD gain of 4.4% as of the end of October from a negative 0.1% at the end of September and a YTD loss of 2.6% in August.

Institutional investors largely dominated transactions at the domestic front, up 81.0% m/m to N112.3bn (US$270.6m) from N62.0bn (US$150.0m) in September 2021. Similarly, the activity level among retail investors surged, up 83.7% m/m to N58.3bn (US$140.5m) from N31.8bn (US$76.8m) in September. On the other hand, foreign outflows increased to N21.5bn (US$51.8m) in October from N12.9bn (US$31.3m) in September. Foreign inflows increased to N20.9bn (US$50.4m) from N11.9bn (US$28.9m) in September, resulting in a net outflow of N0.6bn (US$1.4m) compared with a net outflow of N0.5bn (US$1.2m) in September.

Looking ahead, we reiterate our view that the activity level will remain high in the last two months of the year. One, the news around the PSB license for MTNN and Airtel Africa propelled buying activities in the stocks in November, which will lift the overall market performance. Also, the proposed sale of 575m shares by MTNN in November and December, being the second capitalized stock on the exchange, should keep the market upbeat in our view. Again, Flour Mills of Nigeria Plc (FMN) just announced plans to acquire a majority stake in Honeywell Flour Mills Plc (HFMP), and we expect the announcement to drive activities around both stocks. As we approach the festive period, we expect portfolio rebalancing activities towards risky assets as market participants search for high-yield dividend stocks. Currently, the YTD gain stands at 7.3% which is likely to trend higher, buoyed by anticipated positive corporate actions. Overall, we believe the local bourse is poised for a second consecutive year of positive close, albeit lower than the impressive performance seen in 2020.

• FX: Last week, the Naira traded at ₦414.11/US$ from ₦413.48/US$, in the interbank market.
• Bonds: In the secondary market for Federal Government of Nigeria (FGN) bonds, yields increased across most maturities. The yield on the 3-yr FGN bond decreased by 1 basis point, to 9.44%. Elsewhere, that on the 30-yr FGN bond increased by 5 basis points, to 13.20%. Indicative yields on US Dollar Eurobonds issued by Nigerian entities were between 2.34% and 9.36%, depending on maturity.
• Oil: The price of Brent decreased by 3.99%, from the previous week’s closing price of US$82.17bbl to US$78.89bbl.
• Equities: Last week, the NSE All-Share index fell by 0.12%. The November 2021 Year-to-date return was 7.27%. The Consumer Goods sector declined by 1.98%, on average. There was no gainer. Unilever lost 7.53%. For the Brewers, Guinness and Nigerian Breweries decreased by 2.67% and 2.86%, respectively. The Industrial Goods sector fell by 0.65%, on average. There was no gainer. Lafarge Africa lost 1.96%. The NSE Banking sector lost 3.10%, on average. There was no gainer. GTCO decreased by 7.47%. In the Agriculture sector, Presco fell by 0.11%, while Okomu remained unchanged.