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Breakfast Report - 11 March, 2019

The Week Ahead                                                                            

According to the CBN’s Business Expectations Survey carried out in February 2019, overall business outlook for March 2019 was largely positive. Notably, optimism was strongest in the Services sector and lowest in the Construction sector. Overall, respondents were generally optimistic across all sub-segments, such as volume of total orders, business activity and financial conditions. On the flip side, the usual structural bottlenecks such as power supply, high interest rates, poor access to credit, unclear economic laws were identified as major factors expected to further constrain business activity. Finally, the surveyed firms expected higher inflation in the coming months, as well as higher borrowing rates. Interestingly, respondents predicted a naira appreciation in the next twelve months. Whilst we note that the data is ordinal and does not show scale, it however depicts expectations of economic performance from major Industry players.                                                                                

Equity: The NSE ASI lost 27bps on Friday, capping w/w gains at +31bps. Following a tepid week driven by investor apathy we foresee another mild trading week, with the possibility of bargain-hunting. We also expect further earning releases to drive some interest in the equity market.                    

Stock Watch: Despite a 4.95% gain on Friday, PZ lost 13% last week, making it the worst performer w/w. The stock currently trades at ₦11.65, 3.72% below its year open price, in tandem with the Consumer Goods sector (3.39%).                                                                        

Fixed Income: The DMO recently released the March Bond circular, indicating a lower supply of ₦100 billion (February sale: ₦150 billion) with only ₦20 billion of the 10-year maturity on offer (February sale: ₦136 billion). On the back of this, we foresee increased demand in the bond secondary market this week. That said, we also anticipate a tepid T-bills market as the CBN continues to mop-up liquidity.