The Market Today - 14 June 2017
​May Inflation to fall to 15.8% on base effects
Nigeria’s May 2017 Inflation figures will be released by the National Bureau of Statistics (NBS) on Thursday and we project a 15.8% year-on-year rise in prices for the month (Bloomberg consensus: 16.0%). Headline inflation this year has so far missed expectations (April: 17.2% vs Consensus forecast of 16.9%) on the back of higher food inflation driven by supply-side effects of the planting season and higher transport costs. Although we expect another steep rise in food prices to pressure headline inflation (month-on-month forecast: 1.5% vs 1.6% in April), strong base effects from May 2016 inflation (highest m/m rise in 2016) should exert significant downward pressure on the headline reading. Moreover, steady improvement in foreign exchange liquidity should continue to ease exchange rate pass-through on domestic prices. Overall, we forecast average 2017 inflation of 15.8% (2016: 15.6%), based on the view that persistent food inflation will abate in the coming months.
Profit taking sees ASI slip further as key sectors close red
The Nigerian bourse closed 28bps lower yesterday as profit taking and negative trading sentiment from the previous session filtered into trading and all key sectors closed in the red. Despite the broad-based bearish sentiment on the exchange yesterday, we note the rebounding demand for select blue chips especially in the banking sector. We therefore expect modest buying sentiment in today’s session.
Stock Watch: Amid the stock market rally, HONYFLOUR has risen 85% over 12 sessions. The stock has traded actively over the past sixteen sessions after moving sporadically from the start of the year. HONYFLOUR advanced 461bps yesterday and currently trades at an over one-year high of ₦2.27, putting ytd gain at 75%.
Demand surfaces in T-bills market ahead of auction
Ahead of the Primary Market Auction, the bills market turned bullish with buying interest surfacing across short to mid-dated bills while the bond market persisted bearish with selloffs across select maturities. We foresee cautious trading in the bills space ahead of the Primary Market Auction today where the CBN would be offering ₦236 billion. We expect decent participation at the auction on account of the large OMO maturity of ₦205 billion on Thursday.
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