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The Market Today - 11 December 2018

UK PM postpones Brexit vote, seeks Irish border assurances                                                    

A vote on the final agreement between the European Union (EU) and United Kingdom on the nature of their future relationship was postponed yesterday amid concerns that the Prime Minister’s proposal would be rejected by the House. The lower house was expected to reject the deal as the agreement has no set timeline for a resolution of the issue of the border between Northern Ireland and the Republic of Ireland. The proposal would keep the UK in the Customs Union indefinitely so as to avoid erecting a hard border between Northern Ireland (in the UK) and the Republic of Ireland (in the EU), which has been the major sticking point in Brexit negotiations. However, hardline Brexiteers have opined that remaining in the Customs Union would betray the spirit of Brexit, and the rift raises the possibility that the negotiation period ends in March without a deal in place. However, the European Court of Justice has clarified that the UK would be able to unilaterally reverse its decision to leave the EU before the March 2019 deadline without having to seek ratification from the other member states.                                       

NSE in the red, YTD at 19.95% loss                                                          

"The Nigerian bourse opened the week on a negative note as all key sectors closed in the red. The ASI lost 82bps on the day with the Consumer Goods sector posting the biggest losses. Market breadth remained negative with 14 advances and 25 declines. Amid stronger selloffs across key sectors and much weaker trading activity on the exchange, we foresee another downbeat trading session.                          

Stock Watch: Following CBN’s announcement of the inclusion of fertilizer in items banned from receiving FX, demand for local fertilizer products is likely to increase. NOTORE is currently the sole fertilizer company listed on the exchange. The stock currently trades at ₦62.50, trailing behind its target price of ₦64.94.                                                             

Treasury bills market turns flat                                                

At the start of the week, the CBN conducted another OMO auction, offering c.₦150 billion and selling c.₦63 billion on the 108DTM, 185DTM and 290DTM bills at stop rates of 11.90%, 13.50% and 15.00% respectively (effective yields: 12.33%, 14.49% and 17.03%). Following the mop up, the interbank call rate advanced 14.84% to close at 39.17%. Following continued mop-ups by the CBN, we anticipate further tightening of liquidity and expect bearish sentiment to resume in the secondary market.