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The Market Today - 26 January 2018

IMF upgrades Nigeria’s 2018 growth forecast to 2.1%                                          

Amidst a stronger outlook for Nigeria’s economic recovery, the International Monetary Fund (IMF) has projected Nigeria’s economy will grow by 2.1% (Previous: 1.9%) in 2018. According to the fund, this revision was driven by better than expected performance of key factors such as oil prices. Risks to this growth outlook however include the possibility of a global financial market correction, which could dampen growth and confidence. A possible trigger for this would be a faster than expected increase in advanced economy’s core inflation and interest rates as demand accelerates. Also, poor inward-looking policies, geopolitical tensions, and political uncertainty later in the year also pose downside risks. Though, the fund upgraded its growth forecast for the global economy in 2018 from 3.7% to 3.9%, it however downgraded the 2018 growth forecast for Sub-Saharan Africa by 0.1% to 3.3%, dampened by the more subdued growth prospects in South Africa (0.9% growth forecast for 2018) as increased political uncertainty weighs on confidence and investment.                                   

Bulls nowhere in sight as ASI continues downtrend                                    

Bears continued to hold sway on the Nigerian stock exchange, as the ASI shed another 99bps yesterday. Whilst profit-taking has begun to taper out in the banking sector (major laggard for the week), the ASI remained in the red following a notable dip in heavyweight DANGCEM. As market sentiment stabilizes, we foresee milder selloffs at week close.                                    

Stock Watch: Coming off a 12-month high of ₦3.57, DIAMONDBNK has shed 26% over the last four sessions. The stock currently trades at ₦2.65, below Vetiva’s target price of ₦4.74 and has returned 77% ytd.                                                             

FG Eurobond news spurs buying in Bonds market                                       

The CBN conducted another OMO auction yesterday, offering ₦150 billion across the 91DTM and 224DTM bills, and selling c.₦100 billion across both bills at respective stop rates of 12.60% and 14.40% (effective yield: 13.01% and 15.80%). Trading was largely flat across the space with yields declining 1bp on average in the T-bills space. In the bonds space however, sentiment was mildly bullish following news that the FG plans to raise another $2.5 billion through a Eurobond sale in the first quarter of this year. Yields on benchmark bonds declined 9bps on average. As the CBN continues to conduct OMO auctions, we expect the tightening liquidity to keep sentiment in the T-bills market varied. On the other hand, news of the FG’s external borrowing plans is expected to further support demand in the bond market in today’s session.