The Market Today - 11 January 2018
Tier II banks lead the 2018 market rally
In the first two weeks of 2018, the Nigerian bourse has gained 9.34%, the best start to a year in a while. Though all key sectors have felt the love, Tier II banks have begun the year as the toast of investors – FCMB, DIAMONDBNK and STERLINGBNK stand as the top gainers so far this year, up 49%, 48% and 47% respectively. This is in line with our expectation for the year. In our 2018 Nigeria Outlook, Acta non Verba, we are made a big call for the lower tier names, with the expectation that they would outperform the sector – and broader market – in 2018 given their depressed market valuation. We still expect this to be the case as an improving macroeconomic environment supports a stronger recovery in the earnings of these banks. Nevertheless, we highlight that the lower tier names remain a riskier proposition, particularly in the event of negative economic shocks.
Nigerian bourse soars higher; hits over 6-month high
"Following strong closes across all key sectors, the Nigerian equity market posted its strongest performance since July 2017, rising 360bps. With overall market sentiment remaining markedly positive, we expect the bourse to record more gains in today’s session.
Stock Watch: Riding on the back of positive sentiment in the banking space, UNITYBNK has advanced in every session this year –gaining 39.6% Ytd. The stock currently trades at a price of N0.74.
Positive sentiment permeates Fixed Income market
With the CBN holding off on OMO auctions for another session, Interbank Call rate declined to 13.86% (previous: 16.33%). Trading in the T-bills market turned mildly positive yesterday, with yields moderating 6bps on average. Meanwhile, buy sentiment picked up in the bond space as yields on benchmark bonds declined 12bps on average. We anticipate an OMO announcement today amidst bills maturity to the tune of ₦309 billion. We expect the resulting pressure on system liquidity to weigh on the buying momentum in the fixed income market, hence, foresee a mixed trading session today.
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