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The Market Today - 10 January 2019

World Bank predicts improved Sub-Saharan growth in 2019                                          

In its Global Economic Prospects report on Sub-Saharan Africa (SSA), growth in the region was estimated at 2.7% for the year 2018. The World bank highlighted the slower-than-expected growth in the region was due in part to weaknesses in Angola, Nigeria and South Africa. However, economic growth is expected to rise to 3.4% in 2019 and 3.7% in 2020/2021, as reduced policy uncertainty helps support a rebound in those three economies and the region at large. Notably, post-election activity and clearer political direction in Nigeria is expected to spur investment activities from both foreign and domestic investors. That said, the World Bank lists declines in commodity prices, tightening of global financial conditions and escalating trade tensions as potential external risks that could affect growth, while internal risks include further political uncertainty, domestic conflicts and adverse weather conditions such as the extreme flooding experienced in the food producing region of Nigeria in 2018. The organization also highlighted an outlying risk to oil production from the re-emergence of insurgents in the Niger Delta region and projects a 2.2% growth in Nigeria’s GDP, however, we expect a 2.7% growth in 2019 due to a recovery in oil production and political stability.                                            

ASI sinks to 19-month low amid Industrials sell-off                                            

The ASI dropped 233bps yesterday to reach its lowest levels since May 2017 amid persisting negative sentiment and a steep decline in the Industrial Goods sector. Market breadth remained negative with 14 advances and 19 declines. With negative sentiment continuing to weigh down the ASI throughout the week, we foresee another negative close for the market today.                          

Stock Watch: After losing in five of the last six sessions, DANGFLOUR is down 15% YTD. The stock is currently trading at ₦5.60, the stock has lost 65% of its value in the last 12 months and is trading 7% below its consensus target price of ₦6.00.                                      

Muted activity in FI market as liquidity remains tight                                         

The CBN refrained from mopping up liquidity yesterday. Despite this, the Interbank Call rate advanced 167bps to settle at 26.67%. Trading in the T-Bills space was muted with a positive tilt, as yields declined 4bps on average yesterday, with buying activity on the short-end and selling on the longer-end. Meanwhile, trading in the bond space remained mixed, with benchmark yields declining 1bp on average, however, there was some buying observed on the short-end of the space. With ₦316 billion worth of OMO maturing today, we expect the CBN to once again mop-up the maturing liquidity, and thus foresee a quiet session in the T-Bills space. Meanwhile, we anticipate another mixed trading session in the bond space, with some buying on the shorter end of the curve.