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Breakfast Report - 31 December, 2018

The Week Ahead                                                                            

Purchasing Managers’ Index (PMI) numbers from the Central Bank of Nigeria (CBN) indicate that the economy expanded at a faster pace in December, with Manufacturing PMI rising from 57.9 to 61.1 and non-Manufacturing PMI rising from 58.4 to 62.3. Within the manufacturing sector, 13 of the 14 subsectors surveyed reported m/m expansion, with the primary metal subsector the only subsector to contract in December. Notably, employment levels in both manufacturing and non-manufacturing expanded in December, and stood at 57.0 and 57.9 respectively, indicating a growth in employment levels for the twentieth consecutive month. While year-end PMI data gives us an indication of building economic momentum going into 2019, we expect marginal boosts to select sectors amid electioneering in Q1’19. Overall, we remain optimistic for modest growth next year, and forecast GDP growth of 2.7% y/y in Q1’19.                                                                      

Equity: Despite a 207bps d/d moderation and two negative closes in the shortened week, the pre-Christmas rally held as the ASI closed out last week 86bps in the green. With investors likely to continue to take positions on the final trading day of the year, we expect a positive session today to close out the year and anticipate heightened activity levels.                                                                   

Stock Watch: PZ released its H1’18/19 results on Friday, reporting a 15% y/y decline in revenue to ₦35 billion, and a 107% y/y increase in PAT to ₦1.2 billion. The stock gained 409bps in Friday’s session to settle at ₦11.45 and is down 44% in 2018.                                                                      

Fixed Income: We expect further interventions from the CBN this week to maintain tightened liquidity. However, we anticipate some buying in the market today to close out the year.