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The Market Today - 27 February 2019

Same President, same economic policies?                                     

Following a tedious and nearly five-day election process, President Buhari has been reelected for a second four-year term after reportedly securing 15.19 million votes, above the 11.26 million recorded by the main opposition candidate Atiku Abubakar. While markets are likely to be relieved of the prolonged political uncertainty, we foresee only moderate optimism from market participants in the business as usual scenario, barring any material security issues. We note that while the Buhari administration had earlier in its first term launched the Economic Recovery & Growth Plan to drive sustainable and inclusive growth, focus on jumpstarting the economy turned mostly towards implementing the FG’s social welfare programs such as the Trader Moni and N-power schemes, seemingly less market friendly policies when compared to more critical bill such as the Petroleum Industry Governance Bill and others which the President withheld his assent to. While investors and stakeholders will look to stronger implementation of earlier outlined economic policies, more critically to address in the next four years will be the government’s plan to address Nigeria’s finances and fiscal deficit, which stood at ₦2.5 trillion as at Q3’18, which is likely to expand further following the implementation of the minimum wage hike.

                                               

Market dips as election results filter in                                          

Sell-offs in the Banking and Consumer Goods sectors dragged the ASI to a -69bps close amid the continued collation of Presidential election results. Market activity was mixed with turnover well below average (₦2.4 billion). Market breadth was positive with 23 advances and 22 declines. As investors continue to monitor election results, we expect further mixed activity in the market today, with a slightly negative tilt, even as investor uncertainty is reduced.

                                               

Stock Watch: DANGCEM is expected to release their FY’18 result today, we expect a 10% rise in top-line and a 4% increase in PAT. Reactions to these results are likely to be mixed due to the weaker than usual Q4.

                                               

Yields drop amid buying across T-bills space                                             

The CBN once again refrained from conducting an OMO auction yesterday, meanwhile market liquidity printed at c.₦254 billion with an Interbank Call rate decline of 117bps, closing at 13.79%. As expected trading in the T-bills space remained positive, with buy-side activity prevalent across the curve as average yields declined by 32bps. Meanwhile, trading in the bond space was mixed with buy sentiment observed at the shorter-end and longer end of the space and sell-side activity at the mid-end. With the CBN scheduled to hold a T-bills PMA today, we anticipate a more muted session in the secondary T-bills market, however, should rates close lower, an adjustment in the secondary market is likely. Meanwhile, we expect mixed trading activity to persist in the bond space.