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The Market Today - 3 November 2017

President Buhari to present 2018 Budget next week                                    

President Buhari will reportedly present the 2018 Budget to the National Assembly on November 7, in an effort to expedite the process. We note that whilst the 2017 Budget was presented in December 2016, controversy and debate between the legislature and executive arms of government stalled the eventual assent of the annual budget until June 2017. Naturally, this has limited the fiscal effects of the budget so far – with the first set of capital disbursements only coming in September. The earlier submission of the budget this year is a crucial first step in ensuring that possible issues are flagged up early enough to ensure early passage. With Nigeria’s economic still in need of a fiscal catalyst, efforts to accelerate budget passage are necessary.                                  

Consumer Goods pressure ASI to marginal loss                                             

Weak sentiment across a host of consumer goods names weighed on the market yesterday, with the ASI shedding 3bps. Market sentiment was mixed with demand across banking names partially offsetting pressure on select consumer goods companies. With bids strong on banking stocks at session close, we foresee the sector driving a more positive market performance today.                              

Stock Watch: PRESCO released 9M’17 results, showing a 42% rise in revenue y/y – though 8% behind our estimate. Meanwhile, PAT came in 21% lower y/y and 29% behind our estimate. The stock currently trades at ₦69.82 below consensus target price of ₦83.33 and has returned 74% YTD.                                                

Yields begin to converge following PMA                                    

Amidst an OMO maturity of ₦101 billion, the CBN resumed its OMO auctions yesterday, offering ₦325 billion and selling ₦114 billion across the 112DTM and 210DTM bills at respective stop rates of 16.00% and 17.80% (effective yields: 16.83% and 19.83%). With Wednesday’s Primary Market Auction posting lower stop rates and amidst the OMO maturity, sentiment in the T-bills market remained bullish as yields shed 7bps on average. The bond market also sustained a mild bullish sentiment with demand concentrated at the short to mid-end of the space. Whilst bullish sentiment is expected to persist in the fixed income market, we foresee further liquidity tightening by the CBN restraining buying momentum at week close.