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The Market Today - 17 January 2018

FG released ₦1.2 trillion for capital expenditure in 2017                                    

According to the Debt Management Office (DMO), the Federal Government has released a total of ₦1.2 trillion to finance capital projects in the 2017 budget. In a bid to fund the expenditure, the DMO raised over ₦1 trillion from the domestic market in 2017 through the issuance of the FGN bonds, Sukuk and Green Bonds. The DMO also raised $2.8 billion in the International Capital Market through a $300 million Diaspora Bond in June 2017 and a $2.5 billion Eurobond in November 2017, which together represent about 80% of the ₦1.1 trillion (about $3.5 billion) proposed external borrowing in the 2017 budget. The outstanding amount of $700 million is expected to be raised from multilateral sources in 2018 (albeit for the 2017 budget). Given that only 56% of budgeted capital expenditure in 2017 has been released so far and the 2018 budget is yet to be approved, we foresee prospects of further capital releases as the DMO moves closer to achieving its borrowing targets.

                                               

Bulls continue to prevail, ASI up 217bps                                       

With all key sectors save for the Industrial Goods sector closing in the green, the Nigerian bourse continued its upward trajectory, closing 217bps higher. With a majority of markers indicating a largely positive trading sentiment, we expect trading pattern to remain bullish in today’s session, buoyed by increased foreign investor activity.

                                               

Stock Watch: Following a seven-session bull run, FBNH has now returned 46% Ytd. The stock was the best performing stock in yesterday’s session and currently trades at a three-year high of ₦12.85, above Vetiva target price of ₦11.67. This performance is in line with the generally positive sentiment currently on the banking space                                               

                                               

Mixed trading continues to plague FI market ahead of PMA                                            

The CBN conducted another OMO auction yesterday, offering ₦150 billion and selling ₦30 billion across the 93DTM and 163DTM bills at respective stop rates of 12.60% and 14.40% (effective yields: 13.02% and 15.39%). Despite the positive boost from a better-than-expected December inflation figures, trading in the bond market was mostly tepid, with yields rising just 1bp on average across the benchmark bonds. Meanwhile, sentiment remained mixed in the T-bills market with a slightly bearish bias as liquidity pressures persisted, with yields trending in opposite directions across the space, albeit with more activity weighted on the short end of the curve. We anticipate tepid trading across the T-bills market ahead of today’s PMA where the CBN would be offering ₦220 billion across the 182DTM and 364DTM bills. Also, barring an early release of the anticipated bond calendar, we expect cautious trading to persist in the bond market today.