Review and Outlook of Global Markets

Global Equities Market: Still on a Tailspin despite Stimulus Measures
With social distancing measures grinding economic activities to a halt and widespread carnage in financial markets, the US Fed on Sunday rolled out drastic measures to support the economy. These included a cut in policy rate to a range of 0.0-0.25%, the lowest level since 2015, and an additional $700.0bn in asset purchases. However, risks are still tilted to the downside as the incidence of Covid-19 spread to 169 countries from 118, infections rose to 209,000 with 8,778 deaths recorded. To support the economy, fiscal and monetary policy stimulus are being implemented globally. Some include the $1.0tn emergency stimulus to pay each citizen $1,000 in the US, the £330.0bn business loan package in the UK, $600.0bn stimulus in Germany, CAD$20.0bn economic relief package in Canada, €26.0bn in Italy and the ₦1.1tn intervention fund to support the economy by the CBN in Nigeria.

Performance across the developed markets was bearish. In the US markets, the S&P 500 and NASDAQ fell 9.9% and 8.8% w/w respectively despite a $1.0 trillion emergency stimulus. Likewise, Hong Kong’s Hang Seng and Japan’s Nikkei 225 indices declined 5.1% and 5.0% w/w respectively while the UK’s FTSE All-Share index dipped 4.0% w/w. Germany’s XETRA DAX and France’s CAC 40 indices depreciated 2.5% and 1.5% w/w respectively despite Germany’s $600.0bn stimulus.
In the BRICS market, there was a bearish performance as all indices under our coverage trended southward. Brazil’s Ibovespa index led laggards, down 13.5% w/w while India BSE Sens index lost 12.3% w/w. South Africa’s FTSE/JSE All Share index fell 9.0% w/w despite the central bank cutting rate by 100bps and injecting liquidity into local markets. Similarly, Russia’s RTS and China’s Shanghai Composite depreciated 7.2% and 4.9% w/w respectively.

In Africa, the bearish performance continued as all markets under our coverage recorded losses. Egypt’s EGX30 emerged the top laggard, down 17.8% w/w while Mauritius’ SEMDEX trailed, falling 16.7% w/w. Likewise, Morocco’s Casablanca MASI and Kenya’s NSE 20 indices fell 9.8% and 4.7% w/w respectively. Finally, Nigeria’s All Share Index and Ghana’s GSE Composite declined 2.4% and 0.2% respectively.
In Asia and the Middle East, performance was largely bearish as 4 of 5 indices closed in the red w/w. Turkey's BIST 100 index led laggards, down 9.9%, followed by UAE’s ADX General Index and Saudi Arabia's Tadawul ASI which declined 6.0% and 1.4% w/w respectively. Similarly, Thailand’s SET Index closed the week 0.1% lower. On the flip side, Qatar's DSM 20 index emerge the lone gainer, advancing 4.2% w/w after the government announced QR75.0bn financial package for the private sector and another QR10bn fund infusion into the QSE in view of the challenges posed by Covid-19.

Domestic Equities Market: The Bears Dominate Again… ASI down 2.4% w/w
This week, the local bourse sustained its negative performance as investors reacted adversely to elevated risks associated with the spread of COVID-19 and declining oil prices. Accordingly, the All-Share Index (ASI) fell 2.4% w/w to settle at 22,198.43. Thus, investors lost ₦279.1bn as market capitalisation declined to ₦11.6tn while YTD return declined to -17.3%. Activity level waned as average volume and value traded depreciated 29.3% and 25.5% to 792.6m units and ₦8.7bn respectively. The most actively traded stocks by volume were ZENITH (572.6m units), GUARANTY (546.9m units) and FBNH (350.6m units) while GUARANTY (₦10.5bn), ZENITH (₦7.4bn) and DANGCEM (₦2.5bn) led by value.

Sector performance was bullish as 4 of 6 indices under our coverage gained w/w. The AFR-ICT (+5.4%) and Insurance (+2.8%) indices led the gainers, due to improved demand in MTNN (+10.5%), NEM (+10.4%) and CORNERSTONE (+9.5%). Similarly, the Banking and Oil & Gas indices advanced 0.3% and 0.2% respectively, following price appreciation in UBN (+20.0%), WEMA (+11.1%) and ETERNA (+18.3%). Conversely, the Industrial and Consumer Goods indices fell 4.9% and 3.2% on the back of price depreciation in WAPCO (-5.2%) and DANGCEM (-15.2%) as well as NESTLE (-7.1%) and FLOURMILL (-9.8%).

Investor sentiment as measured by market breadth (advance/decline ratio) improved to 1.4x from the 0.02x recorded last week as 34 stocks advanced relative to 25 stocks that declined. The top outperforming stock for the week were CADBURY (+26.3%), NPFMCRFB (+23.5%) and UCAP (+20.5%) while WAPIC (-22.2%), UBA (-18.7%) and MAYBAKER (-16.7%) led decliners. In the coming week, we expect the bearish trend to persist in the absence of any major market catalyst to stimulate investors’ appetite towards the equities market.

Foreign Exchange Market: Oil Price Plunges to 18-year low as Price War Continues
Increased oil supply by Russia and Saudi Arabia on the production front and the economic impact of COVID-19 on global demand continue to weigh on oil price. On Wednesday, Brent crude price fell to an 18-year low of US$22.85/bbl., after Saudi Arabia threatened to ramp up production to an all-time high of 12.0mb/d in the coming months. Going forward, we do not see a substantial turn around in the direction of oil prices until both parties signal an early return to the negotiation table. The foreign reserves balance depreciated 0.5% w/w to US$35.9bn (3/18/2020) with zero prospect for a rebound.

The CBN spot rate depreciated 5kobo w/w to close at ₦307.00/US$1.00 while at the parallel market, rate opened at ₦380.00/US$1.00 and appreciated ₦5.00 to close at ₦375.00/US$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate lost ₦3.53 to close at ₦372.00/US$1.00. Activity level in I&E Window strengthened this week as total turnover surged 126.3% to US$3.0bn from US$1.3bn recorded in the previous week.

At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts settled at US$13.6bn, 5.3% higher than the prior week. The MAR 2021 instrument (contract price: ₦371.00) had the most buying interest in the week with an additional subscription of US$92.7m which took total value to US$645.6m. Meanwhile, the MAR 2020 instrument (contract price: ₦367.22) was the least subscribed with an additional subscription of US$15.5m putting the total value to US$1.3bn. Next week, we expect the CBN to support the Naira through FX intervention.

Money Market: Rates Trend Higher in the T-Bills Market
OBB and OVN rates opened the week higher at 17.4% and 18.1% respectively from last week’s close of 9.2% and 10.1% as system liquidity fell to ₦135.1bn. On Thursday, OBB and OVN rates slumped to 5.2% and 5.9% respectively as system liquidity rose to ₦683.4bn following OMO maturities of ₦344.5bn. By the close of the week, OBB and OVN rates declined further to 4.8% and 5.3% respectively as system liquidity settled at ₦446.2bn.

The CBN auctioned T-bills instrument worth ₦47.6bn on Wednesday, same as the day’s maturity. Demand was high across board with bid-to-cover ratio of 4.5x, 3.3x and 2.5x for the 91-day, 182-day and 364-day instruments. Notably, stop rates were lower compared to previous auction at 2.3%, 3.4% and 4.6% respectively (vs 2.5%, 3.8% and 5.3%) for the 91-day, 182-day and 364-day instruments. Also, the CBN conducted OMO auction worth ₦150.0bn on Thursday. Although investors subscribed for the 180-day (Offer: ₦10.0bn vs Subscription: ₦2.0bn) and 362-day (Offer: ₦130.0bn vs Subscription: ₦16.0bn) instruments, there were no sales as investors bidded for higher rates due to risk-off approach towards Naira assets.

In the secondary T-bills market, there was a bearish outing as average rate advanced 30bps w/w to 4.5%. Investors sold-off the 182-day instrument resulting in rates advancing 80bps while the 91 and 364-day instruments closed flat. Next week, we expect maturities worth ₦75.9bn from the OMO market and as such, we expect the CBN to mop-up excess liquidity.

Bonds Market: Bearish Sentiment Persist amid COVID-19 Panic
This week, the bonds market maintained a bearish run as yields increased due to concerns surrounding the virus. The week started on a negative note as average yield climbed 34bps on Monday. On Tuesday and Wednesday however, yields fell by 9bps and 21bps in that order. On Thursday, the bearish trend resurfaced as average yield rose 7bps. Meanwhile, on Friday, there was a bullish performance as yields fell 2bps. Despite a bullish performance on 3 of 5 trading sessions, average yield climbed 10bps w/w to close at 11.8%. Across all tenors, investors were bullish on the medium-end with yields moderating 13bps in that space. On the flipside, both short and long-tenured bonds saw jumps in yield by 18bps and 52bps respectively.

In the SSA Eurobonds segment, there was sustained bearish sentiment as average yield jumped 227bps. The NIGERIAN 2021 instrument saw the most sell-off, as yields rose by 469bps. The Ghana 2023 also trailed as yield rose 390bps. On the other hand, sell-off was mildest in the KENYAN 2048 and GHANA 2030 assets, as yields on both instruments increased by 86bps and 92bps respectively.

In the African Corporate Eurobonds market, sell pressure dominated all instruments under our coverage as average yield rose 2.6% w/w. The NEEG ENERGY 2022 and ESKOM HOLDING 2025 instruments led the laggards, as yields trended north by 15.4% and 14.5% w/w respectively. Conversely, UBA 2022 led the gainers with a drop in yield by 245bps. In the coming week, we expect investor sentiment in the bonds market to be shaped by developments surrounding COVID-19.