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Breakfast Report - 2 July, 2018

The CBN released its Purchasing Managers’ Index (PMI) for June with both Manufacturing (57.0) and Non-Manufacturing (57.5) indices posting m/m improvement. The pace of growth came in faster than that of the previous month, the above-50 readings point to further economic expansion as the positive macroeconomic environment (strong crude oil prices, moderating inflation, and stable FX liquidity) continues to support economic activities. We highlight that this represents the fifteenth and fourteenth consecutive months of expansion for both Manufacturing and Non-Manufacturing PMI respectively, indicating steady economic improvement. While the macro-economic indicators all point to economic growth, as we enter the second half of the year we note that uncertainties could taper business activities as electioneering comes in focus.                                                                                                       

Equity: After trading negatively for three consecutive days, bulls returned to the equity market on Friday, with the ASI closing 144bps higher (+110bps w/w). In spite of Friday’s positive close, we note that underlying market sentiment remains weak and we expect this to remain dominant this week, thus steering a mixed trading session.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Stock Watch: The NSE is set to carry out its semi-annual review of its indices this week. The companies likely to be included in the NSE 30 are FCMB, OANDO, BETAGLAS, UACN and STERLNBANK whilst DIAMONDBNK, JBERGER, FO, TRANSCORP and DANGFLOUR might exit the index. We expect to see increased activity on these stocks this week as fund managers adjust their positions accordingly.                                                                            

Fixed Income: Notwithstanding the improved system liquidity (estimated at c.₦80 billion), we expect mixed trading pattern to persist at today, on account of weak investor sentiment.