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The Market Today - 21 December 2018

2019 Outlook – As the dominoes fall

The 2019 elections are finally upon us, and we are cautiously optimistic that the electoral process would emulate the 2015 edition in delivering a peaceful and transparent process, but we anticipate a further slowdown in policy and investment until after the elections. Looking at economic fundamentals, Nigeria can expect modest growth in 2019 (Vetiva: 2.7% y/y, IMF: 2.3% y/y), driven by continued recovery in industrial activity and services. In the fixed income market, rising global interest rates and consequent capital outflows, investor jitters caused by the elections, rising inflation, and tightening monetary policy all point towards higher yields. We project that similar factors would drive the equity market and anticipate a post-election boost to the market but expect overall market performance to remain soft. Nigeria must embrace the responsibility of driving economic growth and development from within. As the dominoes fall, the decisions made at the polls in Q1’19 assume greater significance given the importance of getting economic policy right. Please click for details on

Elevated market activity persists as ASI closes positive                                                

The Nigerian bourse rose 32bps yesterday after strong gains in the Industrial Goods and Oil & Gas sectors outweighed losses in Banking and Consumer Goods. Market breadth turned negative with 17 advances and 24 declines. Mixed sector closes and elevated market activity continues to reflect increased trading from asset managers ahead of the close of the year in our opinion. We expect the varied sentiment to persist at week close.                                                          

Stock Watch: After six quiet sessions, ETI shed 500bps yesterday to hit its year-low of ₦14.25. The stock has shed 16% YTD, largely in line with the Banking sector.                                                         

Fixed Income secondary market turns positive                                                

Amidst a ₦476 billion T-bill maturity, the CBN held another OMO auction yesterday, selling c.₦278 billion (₦550 billion offered) on the 98DTM, 189DTM and 364DTM bills at stop rates of 11.90%, 13.50% and 15.00% respectively (effective yields: 12.29%, 14.51% and 17.64%). The CBN also held a special OMO, selling c.₦196 billion on the 364DTM bill. Meanwhile, the Interbank Call rate declined from 21.71%.to settle at 13.58%. We anticipate continued interest in the secondary bond market today as yields adjust further to Wednesday’s bond auction levels. Meanwhile, we foresee a mixed trading session in the treasury bills space as the CBN maintains a tight monetary stance.