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Breakfast Report - 29 April, 2019

The Week Ahead                                                       

The Central Bank of Nigeria (CBN) published its Purchasing Managers’ Index (PMI) report for April, indicating that the economy grew at a faster pace at the start of Q2. In April, Manufacturing PMI rose from 57.4 to 57.7 and non-Manufacturing PMI grew from 58.5 to 58.7. Within the manufacturing sector, 12 of the 14 sub-sectors surveyed reported m/m growth, with declines recorded in the paper products and primary metal subsectors only. Once again, employment levels in both the manufacturing and non-manufacturing indices expanded in April, printing at 57.0 and 58.7 respectively, marking the twenty-fourth consecutive month of growth; however, the pace of growth contracted when compared to March. Whilst the economy has shown signs of steady growth in recent months, with inflation continuing to moderate m/m, we remain cautious about the level of growth likely to be seen in the economy in the second quarter in the absence of significant fiscal stimulus.                                                     

Equity: We expect to see a mixed open to this week as investors hunt for bargains on some of the counters like Tier 1 banks. However, we do not rule out the possibility of continuous profit taking on some names as seen last week.                                                           

Stock Watch: Following the release of positive Q1'19 earnings (+58% PAT y/y), WEMABANK gained 857bps to settle at ₦0.76 (+21% YTD). After shedding points for most of the short week, the stock recovered lost ground in today's session.                                                          

Fixed Income: While we expect the CBN to further hold off on conducting an OMO auction today, we foresee another mixed trading session in the T-bills space as another round of FX sales could constrain liquidity. Conversely, we expect mild sell-offs in the bond market as investors continue profit-taking.