Breakfast Report - 27 August, 2018
The Week Ahead
The National Bureau of Statistics (NBS) released Nigeria’s Q2’18 Gross Domestic Product (GDP) figures this morning, showing a real growth of 1.5% y/y (Vetiva: 1.6%, Consensus: 2.0%) for the period, below the 2.0% reported in the first quarter of 2018. Notably, we highlight that the slower pace of economic growth was partly driven by a weaker performance in the Oil & Gas sector – reporting a negative y/y real GDP growth of 4.0% (Q1’18: 14.8%) - following the moderation in oil production (Q2’18: 1.84mpd, Q1’18: 2.0mpd) due to a force majeure on some pipelines during the period. Furthermore, sectoral contribution to GDP showed a mixed trend with the rout in Agriculture sector accelerating in Q2’18 (GDP printing at 1.2% vs. 3.0% in Q1’18). Meanwhile, whilst growth in the Services sector picked up (Q2’18: 2.1%, Q1’18: -0.47%), momentum in the Manufacturing sector slowed significantly with Q2’18 GDP at 0.40% vs 6.9% recorded in the previous quarter. Further driven by the weaker than expected GDP figure, we expect sustained downbeat sentiment in the capital markets this week.
Equity: The ASI posted slight gains in the shortened week, rallying 63bps on Friday to clinch a 45bps w/w gain, the first positive w/w close in four weeks. We note that last week’s positive close was driven by a spike in a few large cap stocks, and market sentiment was broadly weak—evidenced by negative w/w closes across three of four key sectors. We anticipate a cautious start to this week’s trading.
Stock Watch: ETERNA has lost 6% in the last seven sessions, the stock is currently trading at ₦6.00 and has returned 48% ytd, outperforming the Oil and Gas sector (ytd: -11%).
Fixed Income: There has been notable buying on short-dated bills, buoyed by healthy system liquidity and this should persist today. However, a cautious market outlook on long-term yields would continue to drive cautious trading in the bond space.
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