The Market Today - 28th February 2017
Nigeria records first full year recession since 1991
Much in line with market expectation, Nigeria recorded the first full year recession since 1991 as Q4’16 GDP growth rate came in at -1.3% (Q4’15: 2.1%, Q3’16: -2.2%) putting FY’16 GDP growth at -1.5%. Oil and Non-oil GDP contracted 12.38% and 0.33% in Q4’16 compared to -22.01% and 0.03% in Q3’16 respectively. Given that the GDP figures came well in line with market expectations, we do not expect this to significantly impact market sentiment. Rather, we believe market will continue to look ahead to economic indicators for Q1’17.
Earnings season in full swing
As the deadline for filing audited report approaches - 60 calendar days after year end (Previous: 90 days), we believe trading in the coming sessions will be largely dictated by investors’ reaction to earnings and dividend announcements. Following the impressive earnings release from ZENITHBANK, we expect the major names to follow suit before week close - particularly DANGCEM, WAPCO, and the top tier banks.
Stock Watch: We believe buying interest for GUARANTY would increase as investors take a cue from the better-than-expected FY’16 earnings of close peer – ZENITHBANK. Analysts’ (Bloomberg consensus) expects GUARANTY to report a 36% rise in FY’16 PAT and dividend announcement of ₦1.96 per share (2015: ₦1.77).
Bearish start to week amidst OMO return
The CBN conducted an unanticipated OMO auction yesterday and sold ₦0.6 billion and ₦15.2 billion on the 227-day and 311-day bills at respective stop rates of 18.0% and 18.6% (effective yields of 20.27% and 22.10%). Amidst the strained liquidity, the fixed income market began the week bearish amidst tight liquidity following the recent CBN intervention through SMIS. We understand that another Secondary Market Intervention Sales of foreign currency has been scheduled for today by the CBN. As such, we believe the strained liquidity would get even tighter, consequently dampening demand for fixed income instruments further in the session ahead.
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