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The Market Today - 14 September 2018

August inflation expected to reverse direction                                                

Nigeria’s inflation data for August is scheduled to be released by the National Bureau of Statistics (NBS) at 12pm today and we anticipate a slight uptick in inflation from 11.1% to 11.2% (Consensus: 11.1%). This increase is despite an expected drop in month-on-month inflation from 1.1% to 1.0% and comes amid weakening base effects as we move further into H2’18. We reiterate our view that inflation is likely to rise in the second half of the year as weaker base effects are met with resurgent food price pressure and likely inflationary impact of fiscal injections as elections approach. In all, we forecast a full-year inflation of 12.4%, down from 16.6% in 2017.                                                      

ASI closes in the red for seventh straight session                                                            

"The NSE ASI continued to trend southwards for the seventh consecutive session, down 84bps in yesterday’s session on account of sustained sell-offs in the Consumer and Industrial Goods sectors.  Whilst some bargain hunting appears to have softened losses on the exchange, we still expect the week to close off in negative territory as bears maintain the upper hand across board.                                                   

Stock Watch: Major blue-chips on the stock exchange are now trading at multi-year lows, with the second largest stock in the Industrial Goods sector WAPCO closing at a 9-year low of ₦20.70 in yesterday’s session following a 10% d/d decline. Having shed 54% of its value ytd, WAPCO is the worst performing stock in the sector.                                                           

Rates continue to rise amidst sustained sell pressure                                                   

"Following an OMO repayment of ₦268 billion, market liquidity rose to ₦384 billion. However, in spite of the inflow, the Interbank call rate advanced 200bps to 10.33%. Meanwhile, the yield curve continued to flatten as sentiment remained poor across both segments of the secondary market, with yields especially advancing at the short end of the curve. Specifically, yields on T-bills advanced 74bps, with pressure concentrated largely at the short end of the space – yields on the 28DTM and 35DTM bills notably advanced 153bps and 146bps to settle at 14.85% and 14.81% respectively. Similarly, the short-end of the bond space was heaviest hit, driving an eventual 13bps rise on average benchmark bonds yields. In particular, the yield on the 15.54% FGN FEB 2020 bond advanced 56bps to settle at 15.22%. Amidst a sustained lack of buy-side interest from investors, we anticipate further advances in the T-bills space and a mixed to negative close to trading in the bond market at week close.