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The Market Today - 04 April 2018

New MPC unlikely to change policy levers                                            

Whilst market continues to anticipate monetary easing in 2018, opinion is divided over the outcome of the emergency monetary policy committee meeting today, the first of the year. Although the induction of the newly ratified MPC members is widely cheered, we note that it would be prudent for the committee to stay their hand at this point whilst providing a clearer indication of their near to medium term monetary policy path. The case for easing is bolstered by moderating headline inflation as well as the need for growth, but we caution against premature easing given sticky underlying inflation (excluding food and energy prices) and rising global interest rates. We anticipate a “HOLD” decision at the conclusion of today’s meeting, and look forward to MPC forward guidance for the rest of the year, in line with global best practice.                                   

Bears dominate as Q2 begins, ASI sheds 156bps                                           

After closing the prior month 421bps lower m/m, the Nigerian Stock market opened the month on a negative note as sizeable declines in DANGCEM pulled the exchange down 156bps. With all sectors closing in the red, widely negative market breadth and intraday trading trending downwards, market sentiment remains significantly bearish and we expect losses to remain dominant on the exchange today.

Stock Watch: UNITYBNK has declined 14% over the last four sessions. This decline comes amidst a prolonged saga between the bank and Milost, a U.S. private equity firm. The stock currently trades at a price of ₦1.16 and has returned 119%.                                        

Healthy liquidity continues to support buying                                     

As liquidity continued to improve in the absence of liquidity mop ups, Interbank call rate declined a further 384bps to 3.33%. Buying persisted in the fixed income market at week open, supported by healthy liquidity conditions. Yields in the T-bills market declined 19bps on average, most notably at the short end of the space. The bond market was similarly positive, with buying concentrated on select benchmark maturities. The CBN is conducting a T-bills primary market auction today, where it will be offering ₦190 billion across the 91DTM, 182DTM and 364DTM bills. Though we do not expect any changes to monetary policy levers at the conclusion of today’s Monetary Policy Committee meeting, we expect strong liquidity conditions to allow further buying in the market.