FREE

The Market Today - 12 July 2018

Nigeria will join ACFTA                                                

President Buhari revealed that Nigeria would soon sign up to the African Continental Free Trade Area (ACFTA) agreement, following encouragement from South African President Cyril Ramaphosa who recently joined the other 44 African countries that had initially signed the ACFTA. We recall that Nigeria and South Africa had spurned the opportunity to sign the agreement earlier in the year, with Nigeria citing concerns around the possibilities of dumping. More recently, President Buhari reiterated the concerns, highlighting the need to protect local industry interests, but revealed his intention to sign the agreement. According to President Buhari, he initially failed to sign the deal because he had not thoroughly read the document and wanted more time to consider the proposition. The ACFTA is one of the most ambitious regional trade agreements and the African Union hopes that it would double regional trade under five years.                                                          

Large cap stocks weigh on NSE                                                 

The Nigerian bourse extended losses, declining 45bps on the day amid an even split between sector gainers and losers. We foresee negative sentiment persisting in today’s session as bears continue to hold sway and amid pressure on blue-chip Industrial stocks.                                                   

Stock Watch: WAPCO has shed 19% in the last nine sessions. The stock currently trades at a price of ₦33.90 (below our target price of ₦57.63) and has declined 24% YTD compared to the Industrial Goods sector’s 6% decline YTD.                                                      

Sell pressure despite healthy system liquidity                                                 

The Interbank Call rate declined 317bps to 10.83% in the absence of a liquidity mop-up by the CBN. Despite healthy liquidity, trading was slightly bearish in the T-bills space with yields rising 9bps on average. Notably, while yields on the 43DTM (+25bps to 11.70%) and 113DTM (+69bps to 12.56%) bills advanced, yields on the 36DTM (-25bps to 11.39%) and 155DTM (-24bps to 12.52%) bills declined. Similarly, yields on benchmark bonds rose 7bps on average, with sell pressure weighted towards the short-dated maturities. Specifically, yields on the 16.00% FGN JUN 2019 and 15.54% FGN FEB 2020 bonds advanced 15bps and 57bps to settle at 13.24% and 13.64% respectively. Amid healthy system liquidity and a ₦314 billion OMO maturity, we expect to see decent buying activity today, barring any CBN liquidity mop up.