FREE

The Market Today - 29 March 2018

Nigerian equity market YTD returns dwindle at the end of Q1                                                  

After hitting a peak of c.17% in January, the NSE ASI has lost steam, gradually declining to a current ytd return of c.7%. We note that the initial rally – a follow-on from positive sentiment in 2017 – was stimulated by a buoyant economic outlook and the expectation of positive FY’17 result. Whilst FY’17 results have been mostly impressive so far, reaction has not followed suit as investors who had initially priced in the strong performances have begun to take profit on the stocks. We however see some upside to market performance in the coming weeks as investors begin to take positions ahead of the release of Q1’17 results, which are widely expected to be impressive. On the risk side however, we note that rising interest rates in the global market as well as upcoming 2019 elections could prompt further increase in risk aversion for local investments. That said, our outlook for the Nigerian capital market remains positive, supported by our growth optimism for the Nigerian economy.                                                              

No respite for equity market; ASI down 107bps                                               

The Nigerian Equity Market slipped to its fourth consecutive loss yesterday, declining 107bps following broad based losses across key sectors. With market sentiment still broadly bearish – indicated by the consistent negative market breadth, strong red closes and down-trending intraday chart – we anticipate another negative session today.                                                   

Stock Watch: Okomu Oil released its FY’17 result, with PAT coming 21% ahead of Vetiva estimate. The board also proposed a dividend payment of ₦3.00/share (Vetiva: ₦2.00). The oil palm producer has returned 6% ytd.                                                          

Yields reverse direction as CBN pauses mop ups                                                             

Boosted by the sustained pause in Open Market Operations by the CBN, Interbank call rate further declined to 9.83% from 20.17%. Consequently, yields in the T-bills market declined 5bps on average across the space. Meanwhile, whilst modest demand returned to the short end of the bond space, the broader market remained bearish, with yields on benchmark bonds rising 3bps on average. With ₦189 billion OMO maturity inflow expected to hit the system today, we anticipate possible demand in the short end of the fixed income space. However, we believe that a likely mop up by the CBN could cap yield moderations.