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Breakfast Report - 18 November 2019

The Central Bank of Nigeria (CBN), published a circular in which they barred local investors and corporates from participating in its Open Market Operations in both the primary and secondary market. Furthermore, to quell foreign investor concerns over liquidity in the space, the apex bank stated that it would provide a one-way quote in the space, particularly for OMO bills. Subsequently, the apex bank lowered rates at the most recent T-bills PMA taking yields at the short end to single-digit levels, while the stop rate on the 364-Day maturity closed at 10.00%. Meanwhile, bonds have seen significant increase in demand, evidenced by the fact that the yield on the 5-Year bond declined 158bps to settle at 12.05%, and the 30-year bond fell 81bps to 13.68% since the October 23, 2019. Yields in the T-bills market should continue to trend lower, on the back of the action of the CBN to maintain its current OMO policy for the foreseeable future.

 

Equity: We expect the equities market to remain positive this week (evidenced by increased transaction sizes, strong positive market breadth as well as renewed investors’ confidence) though profit taking action continues to pose a threat.

 

Stock Watch: GUINNESS maintained its bullish performance, closing 10.00% above its opening price on Friday to settle at ₦28.60. The counter gained 20.68% w/w. 

 

Fixed Income: With a lack of suitable factors to drive sentiment in the T-bills market, we foresee a mixed session at the start of this week. Meanwhile, in the bond market we expect demand to remain strong, particularly at the long-end; as such we expect further yield moderations to start the week.