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The Market Today - 23 October 2018

World Economic Forum ranks Nigeria’s competitiveness

 The World Economic Forum (WEF) recently released its Global Competitiveness Report (GCR), rating Nigeria’s overall score in 2018 at 48 points (out of 100). This places the nation at 115th out of 140 countries, while South Africa received a score of 61. The GCR ranks the performance of countries using twelve criteria, such as infrastructure, macroeconomic stability, financial system, business dynamism among others. Nigeria recorded its lowest scores under ICT adoption (26 pts) and innovation capacity (31 pts) and scored its highest points under market size (71 pts) and labour market (59 pts). We believe the score reflect the underutilization of Nigeria’s demographic dividend as well as the lack of adequate policy measures that could increase the country’s competitive ranking. The WEF has suggested some key initiatives for the country such as restructuring of the educational system, financial support for innovation centers to incubate business ideas and establishment of development finance institutions. 

Trading off to a positive start as earnings boost activity

Despite a steep decline in one of the key sectors, the ASI started off the week on a positive note thanks to gains in three of the four key sectors boosting the market to a +37bps close. Market breadth turned positive with 19 advances and 17 declines. With earnings season near full swing, market activity is likely to remain elevated for the remainder of the month, while investor sentiment will be determined by results. With that, we expect market performance to be mixed-to-positive today.

Stock Watch: DANGCEM released its 9M’18 results yesterday, showing a 14% increase in revenues to ₦685 billion and 3% rise in Profit After Tax to ₦158 billion (Vetiva: ₦148 billion). The stock remained at ₦210 and is trading at an 8% YTD loss.

Investors’ sentiment mixed at the start of the week

Despite the absence of a liquidity mop-up, system liquidity declined to c.₦80 billion at week open. Amidst this, the interbank call rate advanced 733bps to 20.00%. Sentiment in the fixed income market was mixed yesterday albeit with a slightly positive tilt. Yields across the T-bills market declined 10bps on average with a handful of advances on select bills. Whilst the yields on the 17DTM and 164DTM bills declined 66bps and 54bps to settle at 12.30% and 13.05%, yield on the 115DTM bill advanced 70bps to settle at 13.49%. Meanwhile, in the bonds space, benchmark yields declined 1bp on average. Whilst yield on the 14.50% FGN JUL 2021 bond declined 15bps to settle at 15.01%, yield on the 16.25% FGN APR 2037 bond advanced 7bps to settle at 15.21%. On the back of tightened system liquidity, we expect the CBN to refrain from mopping up. Despite this, we foresee another mixed trading session.