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The Market Today - 11 October 2017

IMF upgrades global GDP forecasts                                                        

Yesterday, the International Monetary Fund (IMF) released its October 2017 World Economic Outlook, a follow-up to the previous outlook released in July 2017. The Fund upped its projections for global GDP growth for 2017 and 2018 from 3.5% and 3.6% to 3.6% and 3.7% respectively, primarily driven by improved growth prospects in the world’s largest economies. In particular, the IMF expects Advanced Economies to grow by 2.2% and 2.0% in 2017 and 2018 respectively, compared to 2.0% and 1.9% in its July forecast. This is driven by a more positive outlook in the United States – 2017 GDP growth forecast upgraded 0.1 percentage points to 2.2% – and the Euro Area – 2017 GDP growth forecast upgraded 0.2 percentage points to 2.1%. Whilst the Fund anticipates stronger growth this year across large emerging markets such as China (6.7% to 6.8%), Russia (1.4% to 1.8%), and Brazil (0.3% to 0.7%), it marginally cut its growth expectations for Sub-Saharan Africa (from 2.7% and 3.5% to 2.6% and 3.4% in 2017 and 2018 respectively), due to a deteriorating outlook in South Africa – now expected to grow by 0.7% and 1.1% in 2017 and 2018 respectively (previous: 1.0% and 1.2%). Meanwhile, the IMF maintained its GDP growth projections for Nigeria at 0.8% for 2017 and 1.9% for 2018 (Vetiva: 1.1%; 3.3%).                                                 

ASI halts uptrend as mixed trading surfaces                                                       

The Nigerian Equity Market halted its four-day gaining streak yesterday with the NSE ASI losing 15bps. At mid-week, we expect further varied sentiment on the Nigerian bourse to drive further mixed closes across key sectors.                                                    

Stock Watch: DIAMONDBANK has declined 476bps in two sessions. The stock currently trades at ₦1.00, below Consensus target price of ₦1.59, and has returned 14% ytd, below a 41% return from the Banking sector.                                                            

Yields trend southwards in the bond market                                                     

The Central Bank of Nigeria conducted another OMO auction yesterday, offering ₦30 billion and selling c.₦25.4 billion across the 100DTM and 191DTM bills at 16.00% and 17.87% respectively (effective yields: 16.73% & 19.71%). As the CBN continues to squeeze liquidity further, activity remained subdued in the T-bills market with sentiment largely varied across the space. The bond market however recorded a more bullish session overall as yields on benchmark bonds declined 10bps on average. With rigorous liquidity mop-ups possibly continuing today, we expect buying activities will remain subdued in the fixed income market and foresee a mixed trading session today.