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Breakfast Report - 18 April, 2017

​In the latest World Economic Outlook, International Monetary Fund (IMF) revised its global economy growth expectation for 2017 to 3.5%, slightly higher than an initial January forecast of 3.4% whilst the forecast for 2018 was unchanged at 3.6%. The marginal upward revision comes on the back of improvement in manufacturing and trade primarily from Europe and Asia. The IMF however pointed out that commodity exporters remain challenged, particularly in Africa and the Middle East owing to a mix of adverse weather conditions and civil unrest. In another downside risk to growth, the possibility of a faster pace of tightening by the U.S. Fed could pose difficulties for emerging economies, particularly those with significant dollar denominated liabilities.   

In a shortened trading week owing to the Easter holidays, the Nigerian bourse traded mostly lower with the NSE ASI down 92bps w/w to extend ytd losses to 5.1%. Following firm gains across a handful of stocks in the penultimate week, the market opened the last week lower as investors resorted to quick profit taking. However, the NSE ASI reversed at mid-week, posting marginal gains and sustained the trend till week close on the back of rebounds in a few stocks.

We believe the sustained positive market gains and market breadth (18 gainers vs 13 losers) towards last week’s close suggest the profit taking that weighed on the ASI earlier in the previous week might have cooled off to some extent. We believe this improved sentiment would lift the market to a green close today.

Stock Watch: Since the release of its FY’16 result (PAT up 619% y/y), CILEASING has gained 28% and currently trades at an over one-year high of ₦0.64. The stock gained 847bps on the last trading day of the previous week.

For the Fixed Income market, we note that market sentiment turned significantly bearish at midweek as the CBN ramped up its interventions even as the April Bond auction took place. Considering the muted trading activity at the end of the previous week, we anticipate a cautious start to the week as market participants eye the rate of further CBN interventions.