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The Market Today - 28 February 2019

PMI report indicates further slowdown in growth in February                                       

Purchasing Managers’ Index (PMI) figures from the Central Bank of Nigeria (CBN) indicate that once again, the economy expanded at a slower pace in February, with Manufacturing PMI dipping from 58.5 to 57.1 and non-Manufacturing PMI declining from 60.1 to 58.4. Within the manufacturing sector, 13 of the 14 sub-sectors surveyed reported m/m growth. Once again, employment levels in both the manufacturing and non-manufacturing indices expanded in February, printing at 56.3 and 57.3 respectively, marking the twenty-second consecutive month of growth; however, the pace of growth contracted when compared to January, likely as a result of a slowdown in economic activity amidst election activities. Given that the PMI is a leading indicator of economic activity, we believe actual economic momentum would have been further impacted by the postponement of the elections. Ultimately, we remain cautiously optimistic for modest growth for FY’19, with our forecast GDP growth for the year at 2.7% y/y.                                    

ASI sheds 71bps as bears maintain dominance                                        

The Nigerian market recorded another negative day as the ASI lost 71bps following heavy declines in Oil & Gas and Banking names. Market activity remains tepid as value traded remained below recent levels. Market breadth turned negative with 13 advances and 32 declines. While bearish sentiment in the market has heightened post-elections, we see possibility of a more mixed trading pattern as investors also digest earnings releases filtering into the market. "                                           

Stock Watch: DANGCEM released its FY’18 report yesterday, reporting a topline and bottom line of ₦901 billion and ₦390 billion respectively, coming in 12% & 91% above its FY’17 figures, and 1% & 85% above Vetiva estimate. The stock remained flat at ₦192.50 yesterday.                                  

Sizable yield declines recorded in Fixed Income Market                                       

The CBN conducted its bi-weekly T-bills PMA yesterday selling its full offer of ₦115 billion across the 91DTM, 182DTM and 364DTM bills at stop rates of 10.90%, 13.01% and 14.37% (Effective rates:  11.20%, 13.91% and 16.77%) – lower than previous auction levels. Meanwhile, Interbank Call rate declined 420bps to 9.50%. We expect continued demand across the fixed income secondary market driven by renewed investor interest even as foreign investors take positions post-elections and also given the less aggressive liquidity stance by the CBN.