The Market Today - 25 August 2017
Extension of OPEC supply cut remains on the table
According to the joint OPEC and non-OPEC monitoring ministerial committee, an extension of the current supply cut beyond March 2018 remains on the table, even though they believe that the oil market is moving in the right direction. We note that aggregate OPEC crude oil production rose to 32.9 mbpd in July, above Q2’17 and Q1’17 averages of 32.7 mbpd and 32.2 mbpd and barely within the target range of 32.5 – 33.0 mbpd. The increase can be attributed to Libya whose production rose 150,000 mbpd in July. The price gains of the output cut agreement between OPEC and non-OPEC countries have been capped by a 9% (+750,000 mbpd) rise in U.S. crude production so far this year. An extension of the cut is likely to boost oil prices which have declined 8% from the start of the year, albeit H1’17 average is still 28% higher than in the corresponding period in 2016.
Bearish sentiment dominates NSE
Amidst notable selloffs across key stocks on the exchange, the NSE ASI closed 130bps lower yesterday. We highlight the downward trending intraday chart and the negative market breadth as indication of a dominant sell sentiment in the market. Whilst we expect the trend to persist today, we foresee increased activity in the Banking sector today as investors react to earnings releases from UBA and ETI.
Stock Watch: UBA released H1’17 earnings results just before the close of market, with PAT rising 56% y/y and 10% ahead of Vetiva estimate. Also, the Board of directors declared an interim dividend of ₦0.20/share, in line with expectation. The stock was gained 221bps yesterday and currently trades at ₦9.71. UBA has returned 116% Ytd.
Bond yields adjust to primary market levels
Amidst a ₦95.60 billion maturity, the CBN conducted an OMO auction yesterday, offering ₦60.00 billion and selling ₦21.98 billion across the 182DTM and 364DTM bills at stop rates of 17.950% and 18.549% (effective yields: 19.710% and 22.759%). Trading in the T-bills market was largely mixed yesterday with closing yields relatively unchanged from previous levels. The bond market however saw yields adjust to Wednesday auction levels. We foresee another OMO auction by the CBN today and hence hold a slightly bearish view on today’s session as liquidity potentially comes under pressure.
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