The Market Today - 15 September 2017
August inflation projected at 16.0%
With the National Bureau of Statistics (NBS) expected to release August inflation later today, we maintain our forecast of 16.0% for the month (2017 average: 16.5%). Food prices are likely to remain the main sore point, despite a slight moderation in global food prices in August, according to the Food and Agriculture Organization. One contributor here could be the recent floods in Benue and neighboring states, which would have disrupted food production in that region. Yet even beyond food prices, inflation is deceptively stubborn – stripping out volatile food and energy prices, m/m inflation registered at 1.2% in July, ahead of H1’17 average of 1.1%. Sticky inflation could continue to provide a conundrum for the Monetary Policy Committee of the Central Bank of Nigeria as it seeks to ease monetary policy to support economic recovery in the country.
NSE ASI up 55bps on DANGCEM lift
Notwithstanding persistent tepid market sentiment, the Nigerian Bourse recorded another green close (NSE ASI up 55bps) largely buoyed by gains in select bellwethers. Save for the boost from the few large caps earlier highlighted, market sentiment remains quite lukewarm and looks set to continue today. As such, we see a high likelihood of a market reversal at the close of the trading session.
Stock Watch: CILEASING has gained 14% over the last three sessions. The stock currently trades at a five-year high of ₦1.20 and has returned 140% Ytd.
Yields trend southwards in fixed income market
The CBN continued with its liquidity mop-up, offering ₦120.00 billion at an OMO auction and selling ₦11.72 billion across the 84DTM and 100DTM at stop rates of 16.00% and 17.95% (effective yields: 16.61% and 18.88%). At Wednesday’s PMA, the CBN offered and sold ₦174.15 billion across the 91DTM, 182DTM and 364DTM bills at stop rates of 13.2500%, 17.3610% and 17.7500% (effective yield: 13.7000%, 19.0100% and 21.5678%); the CBN lowered stop rate on the long-dated bill at the auction in line with market expectation. Whilst we expect another OMO auction from the CBN at week close, we foresee further downward adjustment in T-bills yields as traders continue to cautiously position for lower rates in the mid-long term.
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