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The Market Today - 28 November 2017

Capital inflows soar to $4.2 billion in Q3’17                                                        

Sustaining its upward trend, capital inflows into Nigeria rose from $1.8 billion in Q2’17 to $4.1 billion in Q3’17, a 148% increase over the corresponding period in 2016. The spike was primarily driven by stronger economic fundamentals (Q3’17 GDP growth: 1.4% y/y, Q2’17 GDP growth: 0.5% y/y) and growing confidence in the “Investors & Exporters” foreign exchange (FX) window which has buoyed FX liquidity in the country. In particular, foreign portfolio inflows (FPI) more than doubled their H1’17 figure of $1.1 billion, registering as high as $2.8 billion and surpassing FY’16 FPI of $1.8 billion. Furthermore, Other Investment continued to wax strong – up from $0.7 billion in Q2’17 to $1.3 billion in Q3’17. We expect capital inflows to remain strong heading into 2018 as investors seek to lock in higher yields at the fixed income market – amidst expectation of lower interest rates in the medium-term – and stake their confidence in Nigeria’s recovering economy.                                                             

Bears return as NSE ASI declines 22bps                                                

The Nigerian equity market opened the week in the red as bears held sway in the banking sector. Intraday trading and negative market breath show that market sentiment was tilted bearish, particularly in the banking space. We anticipate more sideways trading in today’s session.                                                      

Stock Watch: FIDELITYBK has gained 9% over the last four sessions. The stock currently trades at a year high of N1.74, above consensus target price of N1.52, and has returned 107% Ytd.                                        

Mixed trading in Fixed Income market at week open                                                    

The CBN conducted an OMO auction yesterday, offering ₦90 billion across the 87DTM and 199DTM bills. The apex bank eventually sold c.₦48 billion on both bills at stop rates of 15.85% and 17.60% (effective yields: 16.47% and 19.47%) respectively. Sentiment in the T-bills market turned mixed albeit with a bearish bias at week open as yields advanced 14bps on average across the space. In the bond market, trading sentiment was varied with a slightly bullish bias, as yields declined marginally on average across the benchmark bonds. With the CBN expected to continue with liquidity mop-ups, we foresee sustained mixed trading in the T-bills market, however with a modestly upbeat bias as market participants positon ahead of the primary market auction (PMA) on Wednesday. In the bond market, we expect trading sentiment to remain mixed as profit taking on select bonds offsets underlying buying bias.