The Market Today - 06 September 2018

Current account surplus improves in Q2’18                                                        

Nigeria’s current account surplus increased 8% q/q to ₦2.4 trillion in Q2’18 as a 5% decline in exports was outpaced by a 16% moderation in imports in the period. We note that the decline in exports was driven by normalization of non-oil exports (down 62% q/q) after a spike in Q1’18 as crude oil exports actually grew 4% to ₦3.7 trillion despite some disruptions to oil exports during the period. Looking at Nigeria’s trade profile, China (25%) remains our largest import partner and India (16%) remains our largest export partner. Although the improvement in current account surplus is a positive for Nigeria’s external resilience, it continues to be driven by the country’s ability to produce and export crude oil.                                                            

NSE ASI slumps as key sectors shed points                                                         

The NSE ASI closed lower yesterday following a spate of late activity in the Banking and Industrial Goods sectors. The market shed 149bps on the back of losses in large-caps in both sectors. Despite mixed trading through most of the session, large-caps once again swayed the market late in the session. As such, we foresee another mixed session today amidst sustained tepid sentiment.                                             

Stock Watch: SEPLAT hit a year-low of ₦603.00 yesterday. The stock has lost 3.71% ytd and is trailing its consensus target price by 39% (TP: ₦984.13).                                                           

Second OMO auction fails to dampen T-bills market                                                     

The CBN conducted another OMO auction yesterday, where they offered ₦400 billion and sold ₦138 billion on the 64DTM, 127DTM and 190DTM bills at stop rates of 10.00%, 11.50% and 12.15% (effective yields 10.18%, 11.9793% and 12.9703%) respectively. Amid this, Interbank Call rate inched up by 9bps to 3.17%, as system liquidity remained buoyant at c.₦476 billion. Trading remained bullish in the T-bills space, with yields declining 46bps on average. Notably, yields on the 22DTM and 85DTM bills declined 500bps and 207bps respectively to settle at 6.50% and 9.97%. Meanwhile, the bond space turned bullish, with yields declining 5bps across benchmark bonds. Buying was observed on the short-dated tenors, where yield notably declined 27bps on the 15.54% FGN FEB 2020 to settle at 14.29%.  We expect the CBN to conduct another auction today to mop up the ₦295 billion maturing today. Following this, we anticipate a quiet trading day in the T-bills space. Meanwhile, we anticipate a mixed session in the bond space, with activity focused on the shorter-end of the curve.