The Market Today - 21 November 2018
Inflation report for October
Nigeria’s October inflation will be released this morning and Vetiva expects it to remain flat at 11.3% y/y (Consensus: 11.4) as the ongoing harvest season keeps food price pressure in check. Going forward, we expect dwindling base effects and election spending to drive inflation higher, and anticipate year-end inflation at 12.0% y/y. This would bring 2018 average inflation to 12.2% y/y, a marked improvement on 2016 (15.6% y/y) and 2017 (16.6% y/y) averages. Our initial projection for 2019 is for inflation to rise above 2018 levels, propelled by likely currency weakness, a possible hike in minimum wage, and a much weaker base.
Bourse gains 51bps despite weak market activity
Sustaining gains from the prior session, the ASI opened the week with a 51bps advance, majorly supported by strong gains in the Consumer Goods sector. Market breadth was positive with 27 advances and 8 declines. We expect market to resume trading on a mildly positive note on Wednesday as bargain hunters continue to support buying activity. That said, given the still cautious sentiment in the market, we believe gains will remain modest across board.
Stock Watch: MBENEFIT is currently trading at its year-low of ₦0.23 after losing 800bps in Monday's trading session. The stock has lost 54.00% YtD.
Uncertainty around MPC meeting to dampen market
Market liquidity improved to c.₦80 billion at the start of the week. Despite this, the interbank call rate advanced 384bps to close at 10.17%. Meanwhile, trading in the fixed income market turned mixed on Monday, albeit with a positive tilt. In the treasury bills space, yields declined 1bp on average amidst both buy and sell interest across the curve. Likewise, trading in the bond space was slightly positive with yields on benchmark bonds declining 4bps on average. With investors keeping an eye on the bond auction today as well as the MPC meeting (which holds on today and tomorrow), we expect activity to remain tepid in the fixed income space. As a result of this, we do not foresee significant activity in Wednesday’s trading session.
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