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The Market Today - 16 January 2019

House of Commons votes against Brexit deal

U.K. Members of Parliament yesterday voted overwhelmingly (432 against, 202 for) to reject the Prime Minister’s Brexit bill, driving the country into further uncertainty. The bill, which was voted on last night after being postponed from its original date in December, was closely watched by stakeholders globally and was widely expected to fail. However, following the vote, leader of the opposition party, Jeremy Corbyn, tabled a formal notion of no confidence in the government, which the house will vote on today. The vote is however unlikely to go in favour of the opposition given that minority party, Democratic Unionist Party, have announced that they would back the Prime Minister, making another general election-which would be triggered if the PM lost-unlikely. Meanwhile, President of the European Council, Donald Tusk called for the U.K. to remain in the E.U. after suggesting that the rejection of the Brexit bill in Parliament left a deal looking impossible. With more political uncertainty likely, we expect global markets to follow these developments closely.

Green closes across all key sectors on the NSE                                         

After a largely positive session, the NSE ASI rose 58bps yesterday, led by the Industrial Goods sector. Meanwhile, market turnover returned to previous levels before Monday’s disruptions (₦3.2 billion). Market breadth was positive with 20 advances and 14 declines. Given improved market activity noted yesterday and the return of bargain hunting, we anticipate another positive trading session today as investor sentiment still remain positive.                                               

Stock Watch: Yesterday, the NSE lifted a trading suspension placed on CILEASING. The NSE had placed a two-week full suspension on CILEASING shares to enable the company embark on and complete a share capital reconstruction exercise from 13 to 27 December, 2018. However, this extended into January 2019. The stock gained 9% in yesterday’s session to settle at ₦9.04.             

Anticipation of reduced supply drives demand for bonds                                     

Yesterday, the CBN conducted an OMO auction, offering ₦100 billion and selling ₦23 billion across the 100DTM, 163DTM and 317DTM bills at stop rates of 11.90%, 13.50% and 15.00% respectively (effective yields: 12.30%, 14.37% and 17.25%). Amidst this, the Interbank Call rate declined 10.00% to settle at 21.67%. Whilst we expect another OMO auction to dampen sentiment in the T-bills space today, we foresee continued demand in the bond space as investors look to the secondary market for supply before the bond auctions.