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The Market Today - 23 November 2018

Campaign season kicks off with manifestos                                                       

With the embargo on Presidential campaigns lifted earlier this week, the candidates of the two major political parties have published their manifestos to win over Nigerian voters. Both policy documents have similar themes but purport to undertake different approaches to policy if elected. While the incumbent is in favor of improving the economy through large capital expenditure, funded by debt and an anti-corruption approach, the main opposition prefers to drive Capex through Public-Private Partnerships (PPPs) and has also reiterated his desire to privatize more government owned enterprises. Meanwhile, the two candidates seem to be in agreement that the most effective way to boost the economy is to focus on infrastructure spending and job creation, even as both parties also espouse the need for Nigeria to generate alternative sources of income. That said, the country’s short-term reality remains tied directly to the crude revenues. The Presidential election holds on 19 February 2019 and manifestos can be viewed on campaign websites.                                                 

ASI inches up amid massive block trade                                                               

The Nigerian equity market drew to a tepid +5bps close yesterday, supported by positive closes across two of four key sectors. Meanwhile, the most notable activity in an otherwise dull market was a block trade on ZENITHBANK which drove total value traded for the day to ₦15.2 billion. Market breadth turned positive with 15 advances and 13 declines. Excluding yesterday’s block trade, investor sentiment remained weak. Driven by this, we foresee a muted close to the week’s trading, with a likely tilt to the negative.

Stock Watch: After hitting its 2018-low earlier this month, FLOURMILL has gained 24% in the past four sessions to settle at ₦20.45. The stock gained 995bps in yesterday’s session but is trailing its year-open price by 29%.                                                            

Weak sentiment to persist as MPC fails to shake things up                                                        

Amid a ₦409 billion OMO maturity, the CBN conducted an OMO auction yesterday, offering ₦450 billion and selling ₦330 billion across the 105DTM, 150DTM and 250DTM at stop rates of 11.50%, 13.00% and 14.50% respectively (Effective rates: 11.89%, 13.73% and 16.10%). Following the net maturity, system liquidity improved to c.₦300 billion and interbank call rate declined 454bps to close at 5.13%. Meanwhile, buy sentiment prevailed in the treasury bills space yesterday, with yields declining 6bps on average. On the other hand, the bond market remained flat, with average yields on benchmark bonds staying unchanged. With the MPC decision coming in line with expectation–Committee unanimously voted to hold all levers–we do not foresee any changes in market sentiment. Thus, we expect tepid