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The Market Today - 19 July 2018

Nigeria’s National Carrier unveiled as Nigerian Air                                                         

At the Farnborough International Airshow in London on Wednesday, the Minister of State for Aviation, Hadi Sirika, unveiled the name of Nigeria’s new national carrier: Nigeria Air. Sirika emphasized at the unveiling that the Nigerian government would hold no more than a 5% stake in the company and that it would be managed and led by private investors. The establishment of a national carrier comes at a time when the Nigerian aviation sector continues to struggle with issues linked to inadequate infrastructure, inconsistent regulatory standards, and occasional shortages of jet fuel and foreign exchange. Following the failure of previous iterations of the national carrier and challenges with national carriers across the continent, we are hopeful that Nigeria Air would be able to withstand the challenges in the aviation space.                                                 

Negative sentiment persists for third straight session                                                  

The market entered a third consecutive session of losses as negative closes across key sectors drove the ASI 58bps southward. Though bargain hunting has begun to reflect across select stocks on the exchange, we note that investor sentiment remains visibly downbeat (markedly low volume and value numbers) and thus foresee further negative trading.                                               

Stock Watch: DIAMONDBNK has shed 13% in the last eight sessions.  The stock currently trades at a price of ₦1.25 and has lost 20% ytd, a significant pullback from its year-high of ₦3.57.                                                           

Trading momentum slows amidst PMA                                                

The CBN conducted a T-bills primary market auction yesterday, offering N178 billion and selling N107 billion across the 91DTM, 182DTM and 364DTM bills at respective stop rates of 10.00%, 10.50% and 11.49% (previous: 10.00%, 10.50% and 11.51%). Despite this, the Interbank Call Rate declined to 5.67% (previous: 7.50%). Buying momentum remained dominant in the T-bills space, though at a slower pace compared to previous session, with yields moderating 11bps on average. Of note was the yield decline across the 57DTM (-102bps to 10.96%) and 169DTM (-44bps to 12.24%) bills. Trading in the bond space however remained muted, with yields on benchmark bonds advancing a meagre 2bps on average. Notably, yield on the 14.50% FGN JUL 2021 bond advanced 12bps to settle at 13.53%. Amidst an expected OMO inflow of N430 billion scheduled for today, we foresee the CBN conducting an OMO auction to mop-up liquidity, thus capping demand in the T-bills space. Meanwhile, we expect another quiet session on the Bonds space amidst a paucity of significant market catalysts.