Breakfast Report - 24 July, 2017
The International Monetary Fund (IMF) released its July 2017 World Economic Outlook (WEO), an update on the April 2017 WEO. The Fund maintained global GDP growth forecasts at 3.5% and 3.6% for 2017 and 2018 respectively. This stable global outlook comes as weaker expected growth in the United States (2.3% to 2.1% in 2017) due to a more conservative fiscal multiplier, is offset by upward revisions to growth in both the Euro Area (1.7% to 1.9% in 2017) and China (6.6% to 6.7% in 2017). Notably, Q1’17 GDP growth in those regions outpaced initial IMF projections. The IMF upgraded Sub-Saharan African GDP growth forecast for 2017 from 2.6% to 2.7% on the bank of higher 017 South African growth (from 0.8% to 1.0%) despite the economy entering an unexpected recession in Q1’17. The Fund maintained Nigeria’s 20117 and 2018 GDP growth projections at 0.8% and 1.9% respectively.
Buoyed by investors’ reactions to positive earnings releases, the NSE ASI added 96bps at the close of last week to make it five straight days of gain over the course of the week – up 2.28% w/w, bringing ytd gains to 26.6%.
As Q2’17 earnings season opens up further, we anticipate sustained improvement in market activities; Friday’s turnover: ₦5.1 billion (30-day average: ₦4.0 billion). Given market expectation of a relatively strong earnings outlook, we foresee more gains for the NSE ASI this week.
Stock Watch: Following the announcement of its crossing out of 2,080,104,955 units of ordinary shares from the Staff Share Investment Trust as well as its approval of interim dividend payment, UBA has gained 360bps. The stock currently trades at ₦9.12 (Consensus: ₦9.40) and has returned 103% ytd.
In the fixed income market, we foresee another OMO auction at the start of the week and we expect this to strain liquidity even as fresh liquidity is not expected to hit the system until Thursday (₦65 billion OMO maturity). We foresee mixed trading in the T-bills market at the start of the week. In the bond market, we expect bearish bias to persist amidst sustained tepid trading activity in the market, to be boosted slightly by a ₦20 billion bond maturity.
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