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The Market Today - 11 October 2018

PMS landing cost hits ₦205 per litre amid rising oil prices                                                           

As crude oil prices hover above $80/bbl, the landing cost of imported petrol in Nigeria is at least ₦205 per litre, according to oil marketers. We recall that most petroleum marketers stopped importing petrol into the country sometime in 2017, when the price of oil and the regulated pump price of petrol made it uneconomic—NNPC GMD Maikanti Baru highlighted that landing cost was as high as ₦148 per litre in Q4’17. As a result, NNPC has been the primary importer of petrol products into the country and has shouldered the financial weight of the widening spread between the regulated pump price and the effective open market price. With the current pricing template unlikely to change soon and oil prices remaining at heady levels, the NNPC will continue to bear the significant cost of fuel imports.                      

Mixed trading, poor market sentiment sends bourse down                                                        

Amidst an even split between gainers and losers, the NSE ASI moderated 11bps after another day of poor trading activity, dragged by negative trading sentiment on select large caps. Market breadth turned positive with 21 advances and 17 declines. With investor sentiment remaining tepid amidst sporadic trading and depressed market turnover, we expect trading in today’s session to remain mixed with a bearish tilt.                                                       

Stock Watch: After shedding 435bps in yesterday’s session, UACN has now lost 7% in the last 7 sessions to settle at ₦11.00. The stock currently trades 48% below Vetiva target price (₦20.86).                                          

Trading remains flat as liquidity declines                                                            

System liquidity declined to c.₦110 billion. Amid this, the interbank call rate advanced 50bps to 9.67%. Trading sentiment across the fixed income market remained mixed with a slightly positive tilt. In the T-bills space, yields declined 4bps on average. While buying was observed at the short end—yield on the 64DTM bill declined 42bps to settle at 14.20%, yields on longer-dated bills advanced—the 281DTM bill climbed 65bps to settle at 14.85%. Yields on benchmark bonds were relatively flat as yields declined a mere 1bp. Whilst the yield on the 12.15% JUL 2034 bond declined 9bps to settle at 15.16%, yield on the 12.40% MAR 2036 bond advanced 5bps to settle at 15.21 y/y. On the back of tightened system liquidity, we anticipate more tepid trading in today’s session.