Breakfast Report - 3 October, 2017
The Week Ahead
Driven by a shutdown in Libya’s primary Sharara field, lower U.S. production as a result of severe tropical weather, and strong OPEC output cut compliance in September, Brent crude prices rallied from a 2017-low of $44.82/bbl in mid-June to a 26-month high of $59.02/bbl at the end of September. Prices have steadily weakened since then – closing at $56.12/bbl yesterday – as global production picks up slightly. According to a Bloomberg survey, OPEC compliance weakened to 82% from 88% the month before whilst Libya and Nigeria both pumped more oil than in the previous month. Meanwhile, U.S. production continues to steadily recovery, rising 9% through the month of September on increased capacity utilization in weather-affected regions.
Amidst mixed investor sentiment, the Nigerian Equity Market ended the last trading week with a marginal positive bias, up 3bps on Friday. On a w/w basis however, the NSE ASI slipped 14bps largely pulled down by declines early into the trading week.
Despite the positive market momentum towards week close, we note investor cherry-picking across the market amidst an overall cautious sentiment. We expect this to filter into this week and anticipate sideways trading at week open.
Stock Watch: CILEASING has gained 28% in six straight sessions. The stock currently trades at a 6-year high of ₦1.63, returning 226% ytd.
Whilst we expect demand to remain decent this week as traders continue to lock in on rates particularly on long dated instruments, we expect the tight system liquidity to limit activity in the space. Also, the CBN will offer ₦130 billion at the T-bills Primary Market Auction on Wednesday.
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