The Market Today - 12 October 2017
World Bank 2017 GDP projection for SSA, Nigeria
The World Bank downgraded its 2017 GDP growth forecast for Sub-Saharan Africa (SSA) from 2.6% in June to 2.4% in October (IMF forecast: 2.6%), citing weak investment and productivity as impediments to a stronger pickup in growth. Similarly, whilst acknowledging Nigeria’s exit from recession in Q2’17 (+0.55% y/y), the Bank emphasized that growth came below expectations, and consequently trimmed its forecast for the country from 1.2% to 1.0% (Vetiva: 1.1%; IMF: 0.8%). However, we note that SSA growth expectation for 2018 and 2019 were maintained at 3.2% and 3.5% respectively as commodity prices are expected to strengthen thus improving government revenues. Also, it is expected that sub-Saharan Africa’s recovery would partly be driven by Nigeria and South Africa, the continent’s biggest economies - both exiting recession in the second quarter.
Nigerian bourse dips further at mid-week
The Nigerian Equity Market lost 34bps yesterday as key sectors closed the trading session mixed. Going by flat market breadth and slightly tepid trading in recent sessions, sentiment has cooled on the Nigerian bourse. As such, we anticipate another day of sideways trading and cherry-picking across stocks.
Stock Watch: Following the announcement of its plans to commence with activities to raise additional funds through a Rights Issue and Medium-Term Notes, FLOURMILL has gained 477bps in three consecutive sessions. The stock currently trades at ₦29.20, slightly below Consensus target price of ₦29.59 and has returned 57.92% ytd.
Buy sentiment dominates the bond market
The CBN conducted another OMO auction yesterday, offering ₦20 billion and ₦30 billion across the 106DTM and 141DTM bills respectively. The apex bank eventually sold c.₦3 billion on the 106DTM bill at a stop rate of 16.00% (effective yield: 16.78%) but made no sale on the 141DTM bill. The T-bills market traded mixed yesterday, albeit with a bearish tilt as liquidity pressure constrained demand. In contrast, trading in the bond market was markedly bullish, with yields on benchmark bonds declining 12bps on average. We expect today’s OMO maturity inflow of ₦61.59 billion to ease liquidity and support stronger buying sentiment today, barring another CBN liquidity mop-up.
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