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The Market Today - 13 November 2018

Crude oil prices dip below $70 amid crude supply concerns                                                       

Brent crude price hit $69.38 this morning as concerns over higher than-expected global crude oil supply and an intensifying trade war continues to drag prices. In recent weeks, Brent prices have reversed direction, as the market has begun to doubt the effect of the sanctions in curtailing supply due to i) higher than expected production from OPEC, allies and the U.S. and more importantly ii) lackluster enforcement of the sanctions from the U.S. (the U.S. granted trade waivers to certain countries to resume trade with Iran). Amid all this, Brent spot price declined by almost $10 in October (from $84.98 at month open, to $75.47 at month close) and has continued to fall at an alarming rate. We note that this continued drop in the price of crude oil could have a direct impact on the fiscal position of Nigeria. Luckily, recent statements from Saudi Arabia’s Energy minister suggest that OPEC might be willing to double down on cuts to drive prices back up.                                                       

Banking sell-offs drive market lower at week open                                                       

The market started the week on a downbeat note, as sell-offs in the Banking sector offset mild gains across Consumer and Oil& Gas names, leaving the ASI in negative territory. Market breadth remained positive with 14 advances and 12 declines. Market activity remained well below average amid varied investor sentiment and tepid market activity. As such, we expect an extension of the see-saw movement on the All-Share Index as the week progresses.                                                           

Stock Watch: Amid news of Teleology Holdings finalizing the acquisition of 9mobile, we foresee a potential improvement in sentiment across the lenders (such as GUARANTY, ZENITHBANK and ACCESS) that have an exposure to 9mobile debt.                                                                                                                             

Weak sentiment, uncertainty to constrain FI activity                                                     

With the CBN refraining from conducting a mop-up at week open, the Interbank Call rate fell 183bps to settle at 6.08%. Meanwhile, system liquidity stood at c.₦347 billion. In other news, the Federal Government kicked off a roadshow for the upcoming Eurobond issue yesterday. The issue will consist of 7-yr and 12-yr (re-issue) notes and is expected to open sometime in November. Amidst still weak investor sentiment, we anticipate another muted session in the T-bills space. Also, ahead of the release of the November bond circular, we expect mixed trading to persist in the bonds space.