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The Market Today - 24 November 2017

OPEC leans toward output cut extension                                              

Market watchers still expect an extension to the joint OPEC and non-OPEC output cuts through the end of 2018. This should provide support for global crude oil prices through the year by putting a cap on the supply glut that had weighed on prices for three years. Areas of concern remain the slight reservations of Russia which believes it is too early to announce an extension this month, the duration of the extension, and the effect this decision would have on US shale production. Meanwhile, an extension could mean the inclusion of Nigeria which has been exempted from cuts as the country’s oil production recovered from multi-year lows caused by the resurgent militancy in the Niger Delta region in 2016. Overall, we are bullish on the likelihood of the deal being extended through 2018 – even if not at this month’s meeting – and expect the price support to compensate for any cap to Nigeria’s output. 

                                     

Equity market closes in the green, ASI up 22bps                                           

Despite a see-saw trading session, the Nigerian equity market closed in positive territory (NSE ASI: +22bps) thanks to green closes across three key sectors. Market picked up in yesterday’s session evidenced by the largely positive market breadth and prominent green closes. At week close, we expect a mixed trading pattern with a slightly bullish tilt, with the ASI closing the week with a narrowly flat w/w return.  

                                     

Stock Watch: DANGSUGAR has gained 11% over the last five sessions as bargain hunters swooped into the stock following an 8% decline over the prior seven sessions. The stock currently trades (N15.80) close to its year high of N15.84 – albeit lower than Vetiva target price of N16.75 and has returned 159% Ytd.                                     

                                     

OMO inflow supports demand for Treasury bills                                             

Following liquidity inflows of ₦201 billion, the CBN conducted an OMO auction yesterday offering ₦100 billion but eventually selling ₦54 billion across the 91DTM and 210DTM bills at stop rates of 15.95% and 17.70% (effective yields: 16.61% and 19.71%). Buoyed by the liquidity inflow, sentiment in the T-bills market turned moderately upbeat as yields declined 7bps on average. It was however a majorly quiet session in the bond market as trading sentiment turned tepid. Whilst we expect buying sentiment to persist in the fixed income market at week close as the net liquidity inflow supports demand, we believe demand would be capped by possible OMO issuance by the CBN.