Breakfast Report - 28 August, 2017
The Week Ahead
The National Bureau of Statistics will release July 2017 inflation figures later today. With a stickier base from the second half of 2016, we expect inflation to hold steady at 16.1% y/y (June: 16.1% y/y), even as month-on-month (m/m) moderating to 1.2% (June: 1.6%). Once again, the primary inflationary pressure should come from sticky food prices – June food inflation: 19.9% y/y, 2.0% m/m. However, we initially highlighted resurgent core inflation, which has risen for three straight months in m/m terms, and point that this could contribute to keeping inflation at elevated levels. Amidst this, we still expect inflation to average 16.6% this year, compared to 15.6% in 2016. Stubborn inflation poses a threat to Nigeria’s nascent economic recovery, with the Central Bank of Nigeria indicating that inflation lies above the threshold after which it begins to negatively affect the economy.
Despite recording a positive close on the last day of the week, the Nigerian equity market still closed 74bps lower w/w as earlier losses weighed on the bourse. Overall, it was a largely mixed trading week with the Banking and Consumer Goods sectors recording higher w/w closes whilst the Industrials & Oil & Gas sectors closed lower.
Notwithstanding the overall green close, market sentiment remained tepid on Friday – indicated by negative market breadth as well as lower closes for several large caps. We therefore foresee further bearish trading today.
Stock Watch: After hitting a three-year high of ₦46.00, UNILEVER has since shed 10% over the last four sessions. However, at ₦41.30, the stock still trades above consensus target price of ₦30.69, and has returned 18% ytd.
We expect yields to trend north in the T-bills space given the tight liquidity at week close and anticipated mop-ups this week. The bond market is however expected to remain mixed, with mild interest skewed towards the longer dated bonds.
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