FREE

The Market Today - 03 October 2018

CBN survey indicates improving credit growth CBN survey indicates improving credit growth The CBN’s credit conditions survey for Q3’18 indicated an increase in secured credit to both household and corporates, driven by an improving economic outlook and an overall increased risk appetite of lenders. Lenders also reported that more corporate loan applications were approved in the quarter, with narrower spreads on MPR, even though the same approval criteria were maintained – perhaps testament to the overall improvement in corporate performance. However, they reported shying away from the Commercial Real Estate market as the conditions in that sector remains unfavorable. According to the survey, lenders expect credit supply to further improve in Q4’18, albeit at wider spreads on MPR as they anticipate a mild uptick in yield within the quarter. We expect lenders improved risk appetite, coupled with recent CBN initiatives such as the Real Sector Support Facility (RSSF), to further support credit growth. Fourth quarter begins with negative close The Nigerian equity market began the new quarter on a backfoot as the NSE ASI closed 17bps lower following a red close in the Consumer Goods sector and a last minute pullback in STANBIC (-761bps).  Market breadth remained negative with 22 advances and 23 declines. With market sentiment still tepid, and noting the lack of investor enthusiasm, we foresee another mildly negative close at mid-week. Stock Watch: PZ released its Q1’18/19 results on Friday. The company reported a 14% y/y decline in revenue, and a loss after tax of ₦205 million. Vetiva currently has a 12-Month Target Price of ₦20.15 on the stock, above the current market price of ₦12.55.   
Market opens to positive trading in the new week Driven by healthy system liquidity (Currently estimated at c.₦552 billion), the Interbank call rate declined 117bps to 4.83%. Meanwhile, trading was positive across the T-bills market yesterday, with yields declining 26bps on average. Notably, the 30DTM and 135DTM bills declined 89bps and 82bps to settle at 12.46% and 13.03% respectively. Similarly, demand was healthy in the bond market, with benchmark yields declining 6bps on average. Notably, yields on the 15.54% FGN FEB 2020 bond and 12.50% JAN 2026 bond moderated 32bps and 26bps to close at 13.76% and 14.72% respectively. We expect positive trading to continue across both the T-bills and bond market, driven by the buoyant system liquidity.