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The Market Today - 28 June 2018

BUA to merge Sokoto cement subsidiaries                                                         

Subject to regulatory approval, the boards of Cement Company of Northern Nigeria (CCNN) and Kalambaina Cement Company (KCC) have agreed on terms concerning a merger of the two companies. The merger will be carried out by means of share exchange, with CCNN being the resultant entity. BUA Group (parent company of both entities) recently carried out an expansion of its cement production operations in Sokoto state, inaugurating a 1.5 million MT production plant in KCC. Coupled with CCNN’s current 500,000 MT capacity, we expect the expansion and merger to put CCNN in a better position to take advantage of our strong volume outlook for Nigeria’s cement sector.                                                        

Mixed trading persists on the exchange                                                              

The Nigerian Stock Exchange shed a meagre 6bps on the day following an even split between sector gainers and losers. We expect the negative trading bias to filter into today’s session even as all market indicators point to sustained weak market sentiment. Notably, we highlight the sizable declines on select Banking stocks with heavy volumes and value traded particularly in ZENITHBANK.                                                         

Stock Watch: DIAMONDBNK has shed 12% over the last twelve sessions. The stock currently trades at a price of ₦1.42 and has declined 5% YTD, coming off a 138% peak as at the 19th of January.                                                        

Negative tilt in bond market amidst auction                                                      

The Debt Management Office conducted a primary market bond auction yesterday offering ₦60 billion and selling ₦31 billion across the 5-yr, 7-yr and 10-yr bonds at respective stop rates of 13.50%, 13.80% and 13.81%. Sentiment in the bond space turned largely negative amid the auction, with sell-offs observed across most maturities – yields rose 4bps on average across benchmark bonds. Meanwhile, trading in the T-bills space was varied, with yields remaining unchanged on average. With rates rising at the PMA, we expect yields in the secondary market of the  bonds space to adjust upwards towards PMA rates. Whilst we anticipate the CBN coming in to mop-up a ₦183 billion maturity inflow,  we also foresee trading in the fixed income market persisting mixed today barring any external shocks and amidst tightened system liquidity.