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The Market Today - 16 October 2018

September inflation comes in lower than expectedSeptember inflation comes in lower than expected Inflation rose from 11.2% y/y in August to 11.3% y/y in September, well below Vetiva (11.6% y/y) and Consensus (11.5% y/y). Month-on-month (m/m) inflation moderated from 1.05% to 0.84%, the lowest since April 2018 amid a drop in m/m food inflation from 1.42% to 1.00%—also the lowest since April. This slowdown in inflation is a surprise considering recent inflationary pressure as a result of disruptions to food production due to the herdsmen crisis and flooding in the Middle Belt. However, the moderation in m/m food inflation is likely due to the onset of the harvest season which should last till the end of the year and offers some respite to recent food price pressure. ASI sheds points following choppy session  Amid sustained mixed trading on the Nigerian bourse, the NSE All-Share Index dipped 13bps at week open amid weak market activity and weighty losses from Industrials sector. Market breadth turned negative with 17 advances and 18 declines. Investor sentiment remains subdued amidst persistently low market turnover and mixed trading patterns. We expect trading in today’s session to maintain a mildly bearish tilt. Stock Watch: After shedding 10% in the last 12 sessions, HONYFLOUR closed at a year-low of ₦1.26 in yesterday’s session. This represents a 40% YTD loss for the stock and its lowest price since April 2017. Tight system liquidity wears on fixed income market System liquidity stood at c.₦100 billion at week open. With liquidity still tight, the interbank call rate rose from 19.17% to 39.92%. The fixed income market kicked off the week on a bearish note, with sell-offs concentrated at the long end of the curve. In the T-bills space, yields advanced a mere 1bp, with notable demand on the longer dated T-bills countered by selling across the short to mid-end. In particular, whilst the yield on the 322DTM bill declined 26bps to settle at 15.14%, the yield on the 31DTM bill advanced 28bps to settle at 13.35%. Trading was more bearish in the bond space as yields on benchmark bonds yields advanced 11bps on average. Notably, yields on the 12.50% FGN JAN 2026 and 16.25% FGN APR 2037 bonds advanced 17bps and 13bps to settle at 15.05% and 15.29% respectively. We anticipate more bearish trading amid tight system liquidity.