The Market Today - 06 November 2018

Strike averted as new minimum wage proposed                                      

This morning, the minimum wage tripartite committee completed its proposal for a new national minimum wage, which would be forwarded to the Presidency today. Although the proposed figure has not been disclosed, the labour union had previously demanded a wage of at least ₦30,000. The strike action initially planned for today has been called off, easing concerns over fuel and transport availability in some parts of the country. Although the agreement of a new minimum wage could be seen as a triumph, federal and state governments have found it difficult to meet their current wage demands, with state governments having to borrow funds to meet their current wage bills. Likewise, wages and salaries accounted for 70% of federal government revenues in 2017, and any increase in minimum wage would push this higher.                                            

NSE ASI off to a tepid start as market activity dips                                              

With three of four key sectors moderating at the start of the week, the ASI fell 24bps yesterday even as activity levels remained low. Market breadth remained negative with 16 advances and 25 declines. With weak investor sentiment continuing to affect market performance and activity, we foresee another tepid trading in today’s session with a negative close the most likely outcome.                                 

Stock Watch: After shedding 281bps in yesterday’s session, ETI hit a year-low of ₦15.55, its lowest price since July 2017. The company recently released its 9M’18 results, reporting a 31% increase in PAT y/y (₦58 billion). The stock trades at a 9% discount from its year-open price (₦22.15).                                        

Healthy liquidity boosts short-end of T-Bills space                                               

With the CBN opting to hold off on OMO auctions at the start of the week, the Interbank Call rate declined 100bps to settle at 3.08%, whilst system liquidity came in at ₦692 billion. With market liquidity remaining healthy, and investors showing interest in shorter-dated bills, we foresee continued buy-side activity in the space. Meanwhile, we expect the bond space to remain mixed with a negative tilt as investors remain cautious.