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Breakfast Report - 25 June, 2018

The Week Ahead                                                                            

At the end of last week, OPEC agreed to amend the existing oil output deal by increasing production by 1 million barrels per day (c.1% of global supply). The group, along with countries such as Russia, had targeted a 1.8 mb/d output cut from 2017, but had overachieved their objective partly due to unplanned production slumps in the likes of Venezuela. The increase in production is on the back of concerns that the oil market is tightening going into H2’18 and confidence that existing geopolitical tensions would continue to prop prices. Following an initial rally on Friday, oil prices have moderated slightly as market digests the likelihood of higher supply in H2’18, but we still expect prices to remain strong and forecast an average of $63/bbl for H2’18.                                                                    

Equity: Sentiment at the end of last week persisted bearish, with the NSE ASI ending Friday (-76bps) and last week (-274bps) in negative territory, after losing every session in the shortened week. Trading last week was largely negative, characterized by huge losses in select large caps. Though there is still some room for further losses, we foresee bargain hunting today as investors take position on depressed stocks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Stock Watch: SEPLAT shed 9% last week, pressuring the Oil & Gas sector to a 594bps w/w decline. The stock currently trades at a price of N685.00, below our target price of N970.18 and has returned 9% YTD.   

Fixed Income: Barring an OMO auction by the CBN to mop-up liquidity today, we expect buoyant system liquidity (N842 billion) to support buying.