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The Market Today - 18 October 2017

Oil exports given boost by Nembe Creek trunk line                                                       

Aiteo, operator of the Nembe Creek Trunk Line, which exports the Bonny Light grade, revealed that the export line has been resuscitated following the lifting of Force Majeure. The development is expected to boost Nigeria’s crude exports by almost 150,000 barrels a day. Though positive for Nigeria’s dollar earnings, the expected increase in production may further pressure the OPEC monitoring committee to lift Nigeria’s exemption from the joint OPEC and non-OPEC output cut agreement. We note that Nigeria’s production (as measured by OPEC) increased to 1.86 mbpd in September (August: 1.80 mbpd). However, as the monitoring committee has reiterated that Nigeria will be allowed to stabilize production at current levels, we are optimistic that the status quo would be maintained at the OPEC meetings in November. Given the current healthy level of global crude oil prices, we expect Nigeria’s oil earnings to wax stronger in the coming months. 

Selloffs in Large caps pull NSE ASI lower                                                              

Bearish sentiment overrode the Nigerian equity market yesterday, -81bps, as all sectors closed the trading session in the red amidst notable losses across key large caps. We note that the market was pulled down by negative closes in blue-chip stocks. We expect these selloffs would temper tomorrow as selling pressure eased towards the end of the session.                                                               

Stock Watch: STANBIC has gained 488bps in four consecutive sessions. The stock currently trades at ₦43.2, above consensus target price of ₦33.36 and has returned 188% ytd.                                                    

Mixed trading persists in fixed income market                                                

The Central Bank of Nigeria (CBN) conducted another OMO auction yesterday, offering ₦10 billion and ₦40 billion across the 86DTM and 191DTM bills respectively. Although no sale was made on the short-dated bill, the bank sold c.₦20 billion on the 191DTM bill at a lower stop rate of 17.82% (effective yield: 19.65%), compared to previous level of 17.83%. Amidst persistently tight liquidity, the T-bills market continued to trade with a mixed pattern as yields trended in opposite directions. Likewise, the bond market traded mixed with a mildly bearish bias as yields across benchmark bonds inched 4bps higher on average. Whilst we anticipate mixed sentiment across the fixed income market on account of liquidity constraints, we expect some improvement in demand in the T-bills space from players anticipating lower yields at today’s PMA – ₦90.26 billion is being offered across the 91DTM, 182DTM and 364DTM bills.  Next week, the DMO would offer ₦100 billion in a Primary Market Auction across the 5-year and 10-year tenors.