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The Market Today - 11 August 2017

Nigeria’s economy may have expanded in Q2’17                                            

According to Dr. Yemi Kale, Statistician-General of the National Bureau of Statistics the Nigerian economy would most likely have come out of recession in Q2’17. He highlighted strong performances in manufacturing and agriculture sectors, whilst expecting persistent struggles in real estate and trade. We recall that whilst the oil sector remained in recession in Q1’17, the Non-oil sector recorded a 0.7% growth within the quarter – posting its best performance in five quarters. With oil production up 8% y/y in Q2’17, compared to a decline of 11% y/y in Q1’17, we expect this to have driven the oil sector out of recession in Q2’17. We project GDP growth of 2.1% y/y in Q2’17 (Q1’17: -0.5% y/y) and 2.0% for FY’17.                                  

Choppy session ends in the red, ASI down 11bps                                           

Momentum softened further on the Nigerian bourse yesterday, with the ASI closing lower 11bps to break a six-session gaining streak primarily on losses in Banking and Oil & Gas sectors. Whilst tepid sentiment is expected to persist in other key sectors, we foresee a recovery in banking stocks spurred by better-than-expected earnings release from ZENITHBANK post-market close. We believe this could drive the ASI to a positive close.                                      

Stock Watch: ZENITHBANK released its H1’17 results after market close yesterday, recording 77% and 112% y/y rise in top and bottom lines respectively. The bank also declared an interim dividend of 25kobo per share. After losing 5.8% in the past five sessions, the stock currently trades at ₦24.00 – up 63% ytd.  

Liquidity boost spurs demand in T-bills market                                               

Following a ₦113 billion OMO maturity, the CBN conducted an OMO auction yesterday, offering ₦60.0 billion and eventually selling ₦16.8 billion across the 182DTM and 364DTM bills at respective stop rates of 17.95% and 18.55% (effective yield: 19.71% and 22.76%). After a week-long bearish streak, demand resurfaced in the T-bills market yesterday as the robust system liquidity incited notable buying across most maturities. We expect the robust system liquidity to further support buying sentiment in the T-bills market tomorrow. However, we anticipate a relatively tepid session in the bond market at week close amidst continued sell pressure on short-mid dated tenors.