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The Market Today - 30 October 2018

Government reveals Medium Term Expenditure Framework                                                    

In its recently published MTEF, the Federal Government outlined its key forecasts for the Nigerian economy stating key assumptions for Oil production, Inflation and GDP growth. Notably, the FG expects Nominal GDP for the country to reach ₦139 trillion in 2019 – FY’18 Annualized GDP based on Q2 figure comes to ₦118 trillion – and a GDP growth rate of 3.0% in the same period, a downward revision from last year’s MTEF (4.5%). The FG expects this growth to however accelerate in outer years with GDP forecasts of 3.6% and 3.9% in 2020 and 2021 respectively. This forecasted GDP growth is expected to be supported by stronger oil prices given the upward revision to the benchmark crude price from $45/bbl in 2017 to $60/bbl going forward. The expected acceleration in GDP growth to 3.0% in 2019, comes closely in line with Vetiva forecast of 2.9%, while we expect FY’2018 GDP growth to come in at 1.7%. We note that Nigeria’s economic rebound remains majorly driven by an improvement in the Oil sector as growth in the non-oil sector remains subdued.                                                 

Positive start to week as Banking boosts bourse                                                              

Driven by two of the four key sectors, the ASI climbed 88bps to start the week, cutting Ytd losses to 13.20%. Meanwhile, Intraday performance during the session was mixed, with a late surge in Banking ensuring a positive close. Market breadth remained negative with 16 advances and 17 declines. With today being the deadline for listed companies to file their third-quarter earnings, we anticipate healthy activity on the stock market. Meanwhile, we see a continued mixed trading sentiment, even as earnings releases continue to guide market direction.                                                             

Stock Watch: MOBIL released its 9M’18 results yesterday, reporting a 42% rise in revenue to ₦125 billion and a 71% increase in profit after tax to ₦7.9 billion. The stock currently trades at ₦175.00 and has lost 10% YTD.                                                    

Bond market opens to sell-offs in the new week                                                            

Despite healthier system liquidity, Interbank Call rate advanced 450bps to settle at 14.83%. Though trading sentiment was varied in the T-bills market, closing figures show a mildly upbeat trading pattern as yields declined 7bps on average. Particularly, yields on the 38DTM and 94DTM bills declined 44bps and 27bps respectively to settle at 12.99% and 12.92%. Nonetheless, sell interest was noted on a few bills as the 157DTM bill advanced 21bps to settle at 13.58%. Meanwhile, the bond space was broadly bearish, with negative yield movement prevalent across the curve – benchmark bonds advanced 20bps on average. Notably, yield on the 12.50% FGN JAN 2026 and 12.15% JUL 2034 bonds rose 31bps to settle at 15.60% respectively.  Supported by expected improvement in liquidity, we foresee continued positive trading in treasury bills, while we anticipate sustained downbeat sentiment from select investors in the bond space.