The Market Today - 14 December 2017
IMF keeps an eye on Nigeria’s FX market
The International Monetary Fund (IMF) suggested that despite strides taken to improve the liquidity, flexibility and transparency of Nigeria’s foreign exchange (FX) market, some international investors remain wary of having their funds trapped during a downturn. These comments came on the back of a spike in outflows from Nigeria’s fixed income instruments amidst a moderation in yields; at yesterday’s bond auction, the Debt Management Office sold the 10-year bond at a marginal rate of 13.21% compared to 14.80% in the previous month. However, we note that conditions in Nigeria’s FX market have relatively improved – reflected in external reserves surging to a 3-year high of $36 billion in December. Moreover, with oil earnings bolstered by relatively high prices and stable production, we maintain a positive outlook on FX dynamics in the medium-term.
Nigerian bourse takes a dip as ASI declines 100bps
Bears prevailed in yesterday’s trading session as the Nigerian stock market dipped 100bps. Although yesterday’s session was largely bearish with noticeable sell pressure on select blue chips, we believe selling pressure will taper out in today’s trading session and expect mixed market sentiment.
Stock Watch: NESTLE has gained 13% over the last ten sessions. The stock currently trades at a year-high of ₦1,462.50, above Vetiva’s target price of ₦817.96 and has returned 81% Ytd.
F.I. market persists bullish as DMO slashes rates at bond PMA
At yesterday’s bond auction however, the DMO sold ₦78 billion (offer: ₦100 billion) across the 5-year and 10-year tenors at stop rates of 13.19% and 13.21% (previous: 14.79% and 14.80%) respectively. Amidst the bond auction, yields continued to trend downwards in the secondary market as healthy demand was weighted across most maturities in the space. Meanwhile, buying interest cooled off in the T-bills with yields moderating by a marginal 7bps on average. Supported by total expected maturity inflow of ₦175.5 billion and noting the lower rates at the bond PMA, we expect another bullish session in the fixed income market as yields converge further towards auction levels.
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