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The Market Today - 31 October 2018

ASI heads for third m/m gain in 2018 ASI heads for third m/m gain in 2018 The Nigerian equity market has posted a slightly improved performance in October, with the bourse gaining 105bps m/m by the penultimate day of the month, trimming ytd losses to -13.27%. Should the NSE ASI close the month in the green, it would be the first m/m advance since June (+46bps) and only the third so far in 2018. We note that the improvement in sentiment has been tied to the onset of earning season, with a number of large cap companies posting solid if unspectacular results—particularly banking and industrial goods names. Nevertheless, a risk-off sentiment on emerging markets and imminent domestic elections continues to temper our outlook for the rest of the quarter. With these in mind, we foresee a slight negative bias to overall trading in the rest of the year as investors continue to monitor the global and local economic landscape. Mild losses on Nigerian Bourse amid late earnings rush The ASI lost 8bps following notable declines in the Banking and Oil & Gas sectors. General sentiment remained mixed throughout the session, though with higher than usual market turnover (₦6.0 billion) amid a flurry of earnings releases. Market breadth remained negative with 18 advances and 24 declines. Given that majority of listed companies have filed their third-quarter earnings, we expect investor interest to cool in coming sessions. Driven by another mixed trading session, we expect mild movement on the ASI today to support a positive m/m close on the exchange.    Stock Watch: SEPLAT released its 9M’18 results yesterday, reporting a 104% rise in revenue to ₦174 billion and profit after tax of ₦28 billion (9M’17 LAT: ₦1.6 billion). The stock lost 456bps yesterday to settle at ₦615.50 – its first movement in six trading sessions. Improved system liquidity sustains bullish T-bills market System liquidity remained healthy at ₦155 billion, and amid this, the Interbank Call rate declined 953bps to settle at 9.50%. Bullish trading sentiment persisted in the T-bills market with yields declining 19bps on average. Particularly, yields on the 170DTM and 275DTM bills declined 148bps and 125bps respectively to settle at 13.18% and 15.09%. Meanwhile, calm returned to the bond market after Monday’s sell-off, with mixed trading in yesterday’s session. Whilst the 16.29% MAR 2027 bond advanced 6bps to settle at 15.49%, the 12.15% JUL 2034 bond declined 6bps to settle at 15.54%.  Amid uncertainty over treasury bill stop rates at today’s PMA (following higher stop rate at recent OMO auctions), we anticipate cautious trading in the fixed income secondary market.