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The Market Today - 8 May 2018

CBN allows healthy system liquidity, yields continue to fall                                                      

The Central Bank of Nigeria (CBN) has persisted with its relaxed system liquidity stance in recent times. The apex bank has conducted liquidity mop ups sparingly in the last few months – compared to near daily mop ups in 2017 – and this has provided a buffer for system liquidity and spurred yield moderation in the fixed income market. Notably, the CBN has primarily conducted liquidity mop ups when there is an OMO maturity (Thursdays), a pattern that has increased certainty amongst fixed income traders. We note that declining treasury yields should encourage corporate bond raising and support credit growth – particularly as the risk environment continues to improve. We do not see the CBN altering its loose approach to liquidity management in the near term as we expect key indicators such as inflation to remain on the downtrend.                                                         

DANGCEM lifts Nigerian bourse at week open                                                 

Despite trading lower for most of the session, the Nigerian bourse eked out a modest 4bps gain following a late session rally from market leader, DANGCEM. With only a few major companies yet to release their earnings, we expect the current sideways sentiment to be retained today and in the coming sessions.

Stock Watch: LASACO was the highest traded stock by volume yesterday. We highlight that it has been on an uptrend, gaining 8% over the last four sessions. The company released its Q1’18 results at the end of last month, reporting top line of ₦3.7 billion (Q1’17: ₦3.0 billion) and bottom line of ₦190 million (Q1’17: ₦122 million). The company declared a final dividend of ₦0.04 per ₦0.50 ordinary share. The stock currently trades at a price of ₦0.39 and has declined 22% ytd.                                                       

Quiet trading session to kick off the week                                                          

Despite no OMO auction yesterday, Interbank call rate advanced 475bps to 7.58%. Sentiment in the T-bills space was largely mixed as yields remained flat on average. Trading in the bond space was likewise mixed. Specifically, whilst sell pressure on short dated maturities drove the yield on the 15.54% FGN FEB 2020 bond 63bps higher to 13.12%, modest demand moderated yields on the 10.00% FGN JUL 2030 and the 12.1493% FGN JUL 2034 bond 4bps and 9bps to 13.04% and 13.05% respectively. In the absence of any market catalysts, we expect similar cautious trading in today’s session.