The Market Today - 28 December 2018

Volatile global markets dim outlook for 2019                                                    

2018 was a volatile year for global stock markets, with falling crude prices, US-China trade tensions, monetary policy across advanced economies and Brexit the main drivers of market activity for the year. Driven by a spate of tariff impositions from the two economic giants, trade relations between the U.S. and China deteriorated in 2018, while a rising protectionist rhetoric across other climes have driven a dimmer global growth outlook. Meanwhile, four rate hikes of 25 percentage points each from the U.S. Federal reserve, combined with hawkish rhetoric diminished confidence in US stocks as well as drove a selloff frenzy across emerging markets in 2018. Meanwhile, European investors followed British PM, Theresa May’s bungled attempts to get a deal for Britain while fending off a vote of no confidence from her party, all of which sent European markets on a whirlwind of activity. Furthermore, Asian markets were hit by news of slowing growth from the region’s largest economy, as well as a sudden reversal in crude prices towards the end of the year. These factors point towards a sluggish global market in 2019, as investor uncertainty is likely to persist at least at the start of the year.                                                 

Optimism dented slightly as DANGCEM loss drags ASI                                                  

Despite green closes for three of the four key sectors, a decline in the Industrial Goods sector dragged the NSE ASI down 86bps. Overall market activity was weak, while market gainers outweighed losers two to one. Market breadth turned positive with 34 advances and 17 declines. With investors still looking for bargains in a beaten down market and overall positive activity-evidenced by the positive market breadth- we expect a positive close to week and the penultimate session of the year.                                             

Stock Watch: UNITYBNK gained 57% after seven consecutive positive sessions to take its return for the year to 103%, the second-best performer on the ASI (CCNN: +105%). The stock currently trades at ₦1.08.                                                       

Bond market posts strong yield declines                                                             

"Amidst a ₦589 billion T-bill maturity, the CBN held another OMO auction yesterday, selling c.₦380 billion (₦1 trillion offered) on the 91DTM, 182DTM and 364DTM bills at stop rates of 11.90%, 13.50% and 15.00% respectively (effective yields: 12.26%, 14.47% and 17.64%). The CBN also held a special OMO, selling c.₦646 billion on the 364DTM bill. Meanwhile, the Interbank Call rate declined 17bps to settle at 12.50%. We anticipate continued interest in the secondary bond market today as investors look to cover short positions. Meanwhile, we foresee a mixed trading session in the treasury bills space as the CBN maintains a tight monetary stance.