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ARM Securities Limited
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Nigeria Strategy Report H2 2017 Excerpts - Supply glut underpins broadly bearish trends across soft commodities


  • We continue discussions on the commodity section of our core strategy document – the Nigeria Strategy Report. In today’s piece, we review developments in the global soft commodities market over H1 17 and delineate our outlook for the second half of the year.
  • In contrast to the gains recorded over H2 16 (+2.6% YoY), a broad oversupply picture across most agricultural commodities drove price declines over H1 17 with the S&P GSCI Agricultural Index recording a decline of 2% over the period, largely driven by surplus in Rubber, Crude Palm Oil (CPO), Raw Sugar and Cocoa which underpinned the bearish sentiments across these commodities. However, a rapidly shrinking surplus picture in the wheat market spurred a rally in prices.
  • Our outlook for CPO, sugar and cocoa are bearish buoyed by elevated inventory levels, prevailing surplus in the market and favorable weather conditions. Although lower barley production and tighter supplies support a rally in prices further out, we remain cautious given the existing elevated inventory levels. For wheat, the global supply-demand picture guides to a rapidly shrinking surplus which should drive prices higher. Rounding up our coverage commodities is rubber where the market is expected to return to a bullish state given weak production outlook alongside export quota limits by major rubber producing countries. Overall, we hold a guardedly pessimistic outlook for commodity prices over H2.
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18/07/2017 14 EN
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ARM Securities Limited
ARM Securities Limited

ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape. ​

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