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The Market Today - 6 June 2017

CBN revises guidelines to I&E window
In continuation of its efforts to further improve liquidity in the FX market, the Central Bank of Nigeria (CBN) published an update to the Investors & Exporters (I&E) window guidelines. Prior to this, Authorized Dealer acted mainly as intermediaries (matching trades) and were required to seek approval from the CBN before trading excess foreign currency with other Authorized Dealers. However, the new guideline allows dealers to trade amongst themselves without prior CBN approval. The guideline requires that funds purchased from an Authorized Dealer be utilized the same day and cannot be sold to another Authorized Dealer. The apex bank also requires that all inter-bank transactions be subject to a maximum spread of ₦1.00. Whilst the I&E FX window had been widely applauded in recent weeks, we note that liquidity is yet to return to the pre-currency crisis period. Recent turnover reports from FMDQ shows improving liquidity with about $416 million traded in the week ended May 26 (a little under $2 billion traded within the first four weeks). We expect this new development to further deepen liquidity in the window as Authorized Dealers act as intra-day liquidity providers.

Blue chips boost ASI at week-open, up 385bps
The Nigerian equity market soared to another strong close at week open (NSE ASI: +385bps) driven by strong gains across key sectors. Given the broad-based positive market sentiment – highlighted by positive market breadth – and the strong demand for select blue chip stocks, we expect further gains on the exchange, capped by possible profit taking on select stocks which have advanced significantly over the past few sessions.

Stock Watch: FLOURMILL advanced 10% yesterday. We highlight that a Bloomberg flash note indicated that the stock’s consensus rating was upgraded to a “Buy” on May 24. FLOURMILL has risen 34% since the upgrade and currently trades at a 2017-high of ₦25.51, returning 38% ytd.

Sustained bullish run in bills market at week open
The T-bills market sustained bullish trading at week open with yields moderating across the space. Meanwhile, the bond market was quiet at week open albeit with slight sell pressure observed on select maturities. We foresee weaker buying interest on bills as system liquidity becomes more pressured whilst bond market activity is likely to remain quiet in today’s session.