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The Market Today - 8 August 2017

FG reviews Pioneer status list, co-opts 27 industries                                    

Amidst the ongoing attempt to revamp the Nigerian business environment, the Federal Government of Nigeria approved a list of industries and products eligible for pioneer status in the country. Whilst a total of twenty-seven industries were co-opted into the Pioneer status list, the cement industry and the mineral oil prospecting industries, which are now considered mature by the government, were taken out. However, a three-year window would be granted to these matured firms before the status is taken away. In addition to the review, the Minister for Trade and Investment, stated that the list will be reviewed biennially to ensure that new industries would be captured when required. Pioneer status is a temporary tax moratorium (initially 3-years but could be extended to 5-years) granted to companies in industries considered nascent by the government. This is expected to serve as an incentive for investment in promising industries. We understand that the review was largely in line with the priority sectors recognized in the Economic Recovery and Growth Plan (ERGP) of the government. We expect this to continue to spur investor interest in some promising industries.                             

Mixed trading session ends in the green                                               

The Nigerian bourse rose 27bps higher at week open, lifted by large-cap Consumer Goods names. We note that trading began the week varied as key sectors closed mixed and market breadth turned negative. With more stocks on the offer cart at the end of yesterday’s session, we anticipate further mixed trading today albeit with a bearish bias.                                

Stock Watch: Despite posting weak H1’17 earnings, LIVESTOCK has gained 23.46% in the past three sessions. These gains occurred in light of a recent cross trade on the stock at an above market price of ₦1.00 per share. The stock has returned 19.05%ytd.                                  

Fixed income market mixed at week open                                           

Maintaining its tightening stance at week open, the CBN conducted an OMO auction yesterday, offering ₦60.0 billion and eventually selling ₦34.4 billion across the 185DTM and 332DTM bills with stop rates pegged at 17.95% and 18.55% (effective yield: 19.75% and 22.32%) respectively. With the tight system liquidity capping demand, trading sentiment was mixed in the T-bills market, albeit with a bullish bias as yields declined 7bps on average. Following the aggressive sell-off at previous week’s close, sentiment turned largely tepid in the bond market at week open with most maturities closing the session flat. Despite the liquidity squeeze, we expect the bullish bias on the short end of the T-bills space to persist in today’s session whilst sentiment on the mid-long dated maturities remains mixed. For the bond market, we foresee further tepid trading amidst sustained weak appetite for the longer termed maturities.