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Breakfast Report - 23 July, 2018

The Week Ahead                                                                            

June 2018 inflation fell for the eighteenth consecutive month to 11.2% y/y (Vetiva: 11.1%, Consensus: 10.9% y/y) from 11.6% in May. However, m/m inflation rose for the second straight month to 1.2%, compared to 1.1% in May and above the 2018 m/m average of 0.9%. Despite the recent uptick in m/m inflation, the continued disinflation was driven by the high base from 2017 inflation (June 2017: 16.1% y/y, 1.6% m/m). That said, we maintain our expectation of a modest resurgence in inflation in the latter part of the year as base effects from 2017 wane, higher pressure from food prices (due to ongoing herdsmen conflicts) and greater demand-pull inflation from expansionary fiscal policy and increased electioneering.                                                                                            

Equity: The Nigerian Equity market closed out last week on a positive note, notching 37bps as traders swooped in on beaten-down stocks. However, prior losses in the weak weighed on the ASI, leading to a 211bps w/w loss. Despite Friday's green close, sentiment in the market remains weak. Thus we anticipate a tepid start to this week’s trading albeit with modest demand as traders eye beaten-down stocks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Stock Watch: DANGCEM released its H1’18 results on Friday. The company recorded a 17% y/y rise in revenues, in line with Vetiva estimates, and a 3% increase in PAT, 8% below Vetiva estimates. The stock gained 135bps to settle at N233.10 at close of business on Friday. The company recently raised a N50 billion commercial paper to fund local projects and for working capital purposes.                                                                          

Fixed Income: Despite the overall positive sentiment last week, we see a more cautious start to trading this week amid the release of June 2018 inflation figures and the commencement of the Monetary Policy Committee meeting.