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The Market Today - 08 March 2018

Milost Global Inc. bets big on Nigerian economy                                            

Demonstrating the growing confidence in the Nigerian economy and the substantial long-term potential upside, American private equity firm, Milost Global Inc. has set aside an $8 billion investment fund for Nigeria. The private equity firm is said to be eyeing investments in the real estate, oil & gas, and banking industries, with its senior leadership meeting with various companies to offer them funding. So far, Milost Global Inc. has committed $350 million into Japaul Oil & Maritime Services Plc. and $250 million into Resort Savings & Loans Plc. in the form of debt and equity. The firm has also expressed interest in acquiring a substantial stake in Unity Bank Plc. Amid these reports, investors have swooped in on these stocks, with JAPAULOIL and UNITYBNK up 131% and 13% respectively since 20th February 2018 when this news first filtered in. The investments should prove a boon for these companies as they use the funds to improve and expand on current operations. Moreover, we consider the foreign direct investment a positive sign for Nigeria and a signal of increasing confidence in the domestic economy.                             

Bears return to pressure large cap stocks                                          

Bears returned with full force in yesterday’s session as the NSE ASI shed 151bps amidst red closes in all key sectors. Despite narrowly positive market breadth, sentiment was downbeat on the exchange yesterday amid pressure on large cap stocks. We anticipate a tepid session today, though we do not rule out the potential positive effect of any impressive earnings releases.                                

Stock Watch: SOVRENINS has shed 27% over the last eight sessions. The insurance stock currently trades at ₦0.35 and has declined 30% ytd.                                      

Another mixed session in Fixed Income market                                             

Yesterday, Interbank Call rate declined to 11.33% (previous: 12.67%) even as there was no OMO auction by the CBN. Sentiment in the T-bills space was positive as yields declined 4bps on average with buys observed across the curve. Meanwhile, trading in the bond space was mixed with buy pressure observed on the short end of the curve, whilst sell pressure was observed across the mid to long end. Specifically, yields across benchmark bonds advanced 2bps on average. We anticipate resumption of OMO auction even as T-bills maturity of ₦153 billion are scheduled to mature today. We expect trading to turn more mixed on the back of this with a slight bearish tilt.