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Breakfast Report - 25 September, 2017

The Week Ahead                                                                            

At the Joint Ministerial Monitoring Committee (JMMC) meeting of OPEC and Non-OPEC Countries in Vienna, Austria, counterparties endorsed the current production cut agreement – including Nigeria and Libya’s exemption – till March 2018, as initially agreed. The decision is positive for Nigeria as oil production in the country (excl. condensates) rose above the 1.8 mbpd regular OPEC limit in August. However, the committee, along with Nigeria’s Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, agreed that Nigeria’s production should be allowed to stabilize at current levels before any production cut is considered. Meanwhile, with OPEC compliance in August coming in strongest since the deal began in January, oil prices have remained strong, offering more support for Nigeria’s federal revenues as production approaches the budget target.                                                                          

Following four sessions of sideways trading across sectors, the Nigerian equity market, buoyed by advances in select blue chip stocks, rose 85bps on Friday to close the trading week 138bps higher.                                                                                

Notwithstanding the sideways trading for the most part of last week, we note the bullish tilt at week close as well as recovery in select blue chips. We therefore expect further sideways trading today, albeit with a more bullish bias.                                                                               

Stock Watch: After rallying to a one-year high of ₦63.00, following impressive H1’17 results, WAPCO went on a bearish streak, dipping 23% to ₦48.54 over 24 sessions. The stock has however shown some signs of recovery in recent sessions, rising 6% in the past three sessions to close at ₦51.48, compared to Consensus target price of ₦69.21. Overall, the stock has returned 26% ytd.                                                                               

We expect sentiment to remain bullish in the fixed income market at week open. However, we expect trading in the bond market to turn cautious ahead of the PMA scheduled for Wednesday where the DMO will be offering ₦135 billion across the 5 year, 10 year and 20 year bonds.