The Market Today - 28 November 2017

The anticipated final meeting of the year between the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC partners will end on Thursday with a final decision regarding output cuts, currently running to March 2018. Whilst market watchers still anticipate the group to extend output beyond that month, the waters are slightly murkier now as Russia has cast doubts over the need to extend the deal for too long as the oil market looks to be rebalancing. On its part, the joint OPEC and non-OPEC committee have suggested that the market could rebalance as early as June 2018, so may include June 2018 review period in the deal extension. Oil prices have hovered above $60/bbl for most of November and have been volatile as market anticipate the outcome of the meeting and digest news that North American production is set to rise with the return of critical Keystone pipeline. Meanwhile, we note that there has been no discussion as yet of the status of Nigeria’s exemption from the output cut agreement.

With all sectors save for the Oil & Gas sectors closing in the green, the NSE ASI bounced back from its week open loss to close 68bps higher on the day. We note the resumption of positive trading sentiment on the exchange, driven by bargain hunting across counters and indicated by the strongly positive market breadth. We expect another positive trading session today as investors continue to hunt for value across select stocks. After declining 735bps over four sessions, PZ recorded a mini-recovery on Monday, rising 378bps. That was halted yesterday as the stock lost 482bps to close at ₦22.72, still above our target price of ₦20.97. The stock has returned 57% ytd.

Trading sentiment in the bond market remained mixed yesterday as selloffs on mid-dated maturities offset buying bias on the longer end of the space. As such, yields across benchmark bonds remained unchanged on average. Meanwhile following the OMO auction, sentiment in the T-bills market turned downbeat with yields advancing 16bps on average. Notably, yields on the 23DTM and 198DTM rose 108bps and 47bps to close at 17.68% and 19.36% respectively. Ahead of today’s T-bills Primary Market Auction where the CBN will be offering ₦117 billion across the 91DTM, 182DTM and 364DTM bills, we foresee a mixed trading sentiment in the T-bills market.  Likewise, we expect investor cherry picking across the bond space to keep trading varied.