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The Market Today - 27 October 2017

Nigeria status in Frontier markets index maintained                                                     

Further boosting prospects of growth in the Nigerian equity market, Index provider MSCI has announced that Nigeria would remain a part of its Frontier Markets index. Whilst Nigeria was never officially taken out of the Index, its status as a member country had been under review following controls put in place by the CBN to defend the naira. The major concerns were are illiquidity of the market as well as the perceived overvaluation of the currency. However, since the introduction of the I & E FX window, a currency window that allows for market-determined rates and price discovery, MSCI affirmed that there had been significant improvements in this regard. Specifically, MSCI alluded to the fact that since the establishment of the I & E Window, funds can be repatriated at a market determined rate and concerns on the spreads and delays which investors had earlier experienced have eased. We note that whilst consensus expectation was that Nigeria would remain on the index, affirmation of this from the index provider removes any outlying risk of reclassification as a standalone index and positions the equity market for improved participation.                                                         

Nigerian bourse regresses as selloffs pressure NSE ASI                                                                

Amidst a flurry of earnings releases, tides turned for the Nigerian bourse with the market closing the session negative – ASI down 29bps. We expect sideways trading to persist today as more 9M’17 earnings continue to roll in.                                                        

Stock Watch: NB released 9M’17 earnings yesterday, with revenue coming in at ₦255 billion. Whilst PAT came in 19% higher y/y (9M’16: ₦24 billion), it lagged our estimate by 28%. Notably, the company declared interim dividend of ₦1.00 for its shareholders. The stock currently trades at ₦155.00 after losing 373bps yesterday and has returned 5% ytd.                                                       

Bearish Sentiment dominates bond market following PMA                                                       

Ahead of a ₦94 billion OMO inflow yesterday, the CBN conducted an OMO auction, offering ₦30 billion and ₦50 billion on the 91DTM and 203DTM bills respectively. The apex bank sold c.₦53 billion on the 91DTM and 203DTM bills at a stop rates of 16.00% and 17.80% (effective yields: 16.6648% and 19.7558%) respectively. The T-bills market was dominated by bullish sentiment, with yields moderating 13bps across the space. On the other hand, trading across the bond market was mostly quiet with a slight bearish undertone – yields advanced 6bps on average. Specifically, whilst stronger sell pressure was weighted towards shorter dated bonds, yields also advanced on select benchmark bonds. Whilst we expect demand to remain healthy across the T-bills space, we expect CBN’s tight monetary policy stance to cap yield moderations. However, we expect yield moderation to continue in anticipation of lower yields across the bond space.