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The Market Today - 21 September 2017

U.S. Fed sets October date for balance sheet underwriting                                                        

At the United States Federal Reserve (Fed) meeting on Wednesday, policy makers decided to leave interest rates unchanged at 1.25%, and reiterated their stance that interest rates would be hiked once more by year-end.  More notably, the Fed said it would begin to unwind its $4.5 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities from October 2017 as the committee believes the US economy is ready for less monetary stimulus. With the Fed targeting a modest start to the unwinding process (reducing balance sheet by $10 billion each month) and market participants anticipating the decision, we do not expect any meaningful resultant market volatility. Nevertheless, we note that the monetary policy normalization process remains fraught with uncertainties for U.S. and global financial markets, and we expect capital flows to remain sensitive to the movement in market rates in the U.S.                                                               

Blue-Chip stock lifts market, ASI up 104bps                                                        

Having traded relatively flat intraday, the Nigerian stock market recorded its first positive close in four sessions (NSE ASI up 104bps) yesterday thanks to late-session gains in cement sector blue chip. Notwithstanding the positive market close, sentiment remained mixed, as seen by even market breadth and an even split between key sectors. We expect the mixed market direction to persist today albeit with a positive tilt given improving demand on several blue chips.                                                                

Stock Watch:  After rising to a five-year high of ₦0.78 in mid-August, LINKASSURE slumped 27% over twenty sessions. The stock has enjoyed a mini-renaissance, rallying 17% over four sessions to ₦0.66, and has returned 32% Ytd.                                                 

FI market turns bullish as CBN oversells at PMA                                                              

The Central Bank of Nigeria conducted a Primary Market Auction yesterday, offering ₦140.89 billion across the 91DTM, 182DTM and 364DTM bills. In the currency market, the Naira depreciated ₦0.45 against the dollar in the I&E FX Window to close at ₦360.67 whilst remaining flat at the parallel market, closing at ₦365.00 against the dollar. With market participants anticipating the lower stop rates at the PMA, bulls dominated the T-bills market yesterday with strong buying across the curve. We expect the CBN to resume with its persistent liquidity mop-up (via OMO auction) even as ₦141 billion worth of OMO bills is scheduled to mature today. Notwithstanding, we foresee further demand in the fixed income secondary market as yields converge towards auction levels.