Breakfast Report - 6 November, 2017
The Week Ahead
According to data from the National Bureau of Statistics (NBS), Pension Fund Administrators (PFA) participation in the Nigerian equity market has steadily increased through the year. Total PFA asset under management (AUM) allocated to the domestic equity market increased from 8.13% at the end of 2016 to 8.66% at the end of Q3’17, representing a ₦120 billion inflow over the period. We note that this rise came within the backdrop of National Pension Commission (PenCom) regulations prescribing a new multi-fund structure for Retirement Savings Account that encourages greater equity exposure. Furthermore, the Nigerian equity market rallied 32% in the first nine months of the year as some foreign investors returned to the Nigerian bourse following partial liberalization of Nigeria’s foreign exchange market. This development is also likely to have buoyed greater PFA participation in the market. With implementation of the multi-fund structure extended until early-2018, we expect even more PFA participation in the near-term to provide support for the equity market.
Despite continued mixed sentiment across key sectors, the Nigerian Equity Market closed marginally higher (+17bps) on Friday, leading to a 131bps w/w gain.
Given the slightly positive market breadth (Advances – 23; Declines - 19) and strong closes across a few key sectors, we anticipate a positive trading session today.
Stock Watch: After gaining 15% over three consecutive sessions, FBNH declined 84bps on Friday. The stock currently trades at ₦7.05, below Vetiva target price of ₦8.64, and has returned 101% ytd. We note that the company released its 9M’17 results last week, reporting better than expected performances across most key line items with top and bottom lines coming in 6% and 8% stronger y/y.
Whilst we expect healthy demand to persist across the FI market this week as investors look to lock in high rates in anticipation of further rate decline, we expect yield moderations to be capped by the steady pace of OMO mop ups.
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