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The Market Today - 26 March 2019

Monetary Policy Committee to maintain status quo                                        

The Monetary Policy Committee will conclude its second meeting of 2019 today, with the committee’s key focus likely to remain on price and exchange rate stability as well as stimulating economic growth. Against expectations, Headline CPI has continued to moderate this year, amidst a milder than anticipated effect of electioneering on price levels. That said, we note that the CBN expects inflation to hit a high of 12% this year (likely driven by anticipated effects of a minimum wage hike) before moderating further. Meanwhile, pressure on the exchange rate has also been weaker than forecasted at the start of the year, driven by softer monetary policy directions from advanced economies. With Consensus expectations and a growing fear of a slower global economy indicating a continuation of loose monetary policy in the U.S. and EU, we see this stability persisting through the year. Following these developments, we do not expect the CBN to deviate from its current HOLD path, especially given their current expectation of improved Real GDP growth for 2019 to 3.0% y/y, stronger than IMF (2.0%) and World Bank (2.2%) forecasts.                                              

Market opens the week with red closes across all sectors                                         

The Nigerian Bourse resumed its negative performance yesterday, shedding 31bps after all sectors closed in the red. Market breadth remained negative with 12 advances to 19 declines. We expect a mixed trading session in the equity market today with a negative tilt as continued sell-offs out-weigh mild buy interest on select stocks.                                     

Stock Watch: MOBIL released its FY’18 results on Friday, reporting topline and bottom line figures of ₦164.6 billion (+31% y/y) and ₦9.3 billion (+24% y/y) respectively. The stock lost 1.76% yesterday to settle at a share price of ₦167.00.                                     

Fixed income market opens the week on a quiet note                                    

As expected, the CBN refrained from conducting an OMO auction at week start. Meanwhile, the Interbank Call rate advanced 818bps to settle at 22.43%. Despite a quiet day yesterday, trading in the T-bills market was positive, with mild buy interest observed across all maturities. Meanwhile, trading remained tepid in the bond space, with flat trading observed on most bonds and average yields on benchmark bonds moderating 1bp. We expect another quiet day in the secondary market today as investors await the conclusion of the MPC meeting today, where we anticipate a HOLD decision.