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The Market Today - 16 March 2018

IEA sees healthy oil demand but shale may weigh                                               

The International Energy Agency (IEA) expressed a more bullish view of global oil demand in its Oil 2018 Report, raising its growth forecast by 0.1 mb/d to 1.5 mb/d despite growing concerns about large oil consumers substituting away from oil. However, the Paris-based agency also expects oil supply to rise at a faster pace, driven by a ramp up by non-OPEC suppliers led by the United States. Amidst this, global crude inventories may rise marginally, particularly in the first half of 2018 as non-OPEC producers ride out the price wave spurred by bullish expectations of the global economy and ongoing uncertainty in parts of the Middle East. We remain relatively bullish on oil prices through 2018 (forecast: $60/bbl), as long as the OPEC output agreement remains in place (to be reviewed in June) and expect this to support Nigeria’s economic reform efforts.                                     

Sell-offs rock the Nigerian bourse, ASI sheds 153bps                                          

The Nigerian Stock Exchange was hit by negative closes across most key sectors, the ASI declined 153bps. With market breadth remaining widely negative and down trending intraday trading, sentiment on the market remains bearish and we expect this to persist at week close.                                     

Stock Watch: REGALINS has shed 42% over the last nine sessions. The insurance stock currently trades at an all-time low of ₦0.28 and has declined 44% ytd.                                            

Sentiment dampens as CBN mops up ₦444 billion                                   

The Central Bank of Nigeria resumed with OMO auctions yesterday offering ₦400 billion and eventually selling ₦444 billion across the 105DTM and 259DTM bills at stop rates of 12.60% and 14.40% respectively (effective yields: 13.07% and 16.04%), offsetting the ₦453 billion T-bills maturity. Whilst the fixed income market had opened to strong buying pressure, sentiment quickly turned mixed following the announcement of the OMO auction. Overall, yields advanced 4bps on average in the T-bills space amidst the reversal in sentiment. Similarly, sell pressure dominated the Bond space as yields on benchmark bonds advanced 7bps on average. With the CBN putting pressure on system liquidity through its OMO auction, we expect sentiment on the market today to remain mixed with a bearish bias at week close. We highlight that the DMO is conducting a Primary market Bond Auction next week at which it’ll be offering ₦70 billion across the 5-yr, 7-yr and 10-yr tenors (February Offer: ₦100 billion).