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The Market Today - 14 November 2018

OPEC forecasts reduced oil demand for fourth straight month                                       

In its November report, the Organization of Petroleum Exporting Countries (OPEC) lowered its oil demand growth forecast for 2019 for the fourth consecutive month to 1.29 mb/d. Meanwhile, the group’s output rose 0.13 mb/d to 32.90 mb/d in October as Saudi Arabia and UAE compensated for declining output in Iran. Brent crude prices fell to $65/bbl yesterday, a far cry from the year-high of $86/bbl in October, and Saudi Arabia Energy Minister Khalid Al-Falih said on Monday that OPEC had agreed that there is a need to cut output to avoid an over-supplied market in 2019. Amid this, Saudi Arabia committed to a 0.5 mb/d cut in December and suggested the group may cut as much as 1.0 mb/d in 2019. However, with oil demand waning amid trade war headwinds in China, and non-OPEC supply expected to remain robust through the year, we expect oil prices to remain soft.                                            

Industrials renaissance supports flat market close                                              

Following an even split between gaining and losing sectors, the NSE ASI closed slightly positive (+3bps), with intraday activity remaining mixed and the Industrial Goods sector driving the little positive activity. Market breadth turned negative with 17 advances and 25 declines. Amid still weak investor sentiment, we anticipate another tepid but negative trading session.                                        

Stock Watch: DIAMONDBNK has been on a steady decline in November, shedding 26% of its price since month open to settle at ₦1.05, its lowest price since October 2017. The stock has suffered under assertions of liquidity challenges, with the bank’s CAR hovering at 16.3% as at Q3’18.  The stock has lost 30% of its value since year open.                                                          

Market turns bearish ahead of T-bills PMA                                     

The CBN once again held off from conducting an OMO auction yesterday. Amid this, the Interbank Call rate declined 41bps to settle at 5.67%. Meanwhile, system liquidity stood at c.₦160 billion. Barring any positive trigger today, we anticipate another mostly negative session in the bond market as sentiment remains weak. Meanwhile, we expect a quieter T-bills space amid today’s auction.