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The Market Today - 9 August 2017

Countries pledge continued support for OPEC cuts                                                        

The Organization of Petroleum Exporting Countries (OPEC) recently held a meeting following reports that several countries had failed to comply with their respective oil production cuts. At the meeting, Iraq, United Arab Emirates, Kazakhstan and Malaysia - who have lagged in their implementation pledged their full commitments to the production cuts. They all reiterated their support for the deal as well as the system put in place to ensure full conformity by all participating countries. If carried out, this would further help OPEC achieve its end goal of reducing oil supply by as much as 1.8 million bpd this year in spite of production ramp-up in exempt countries like Libya and Nigeria. Furthermore, we highlight the sustained stability in oil prices in recent time, holding above $50/barrel since the end of July. We note that strong global oil price remains positive for the recovering Nigerian economy amidst the recent crude production ramp up to as high as 2.35 mbpd.                                                         

Consumer Goods sector lifts Nigerian Bourse                                                   

Lifted by advances across major Consumer Goods names, the Nigerian bourse closed 126bps higher yesterday, extending gains to six consecutive sessions. Whilst we note the negative closes across most sectors, we point to the largely positive market breadth and intraday chart as indication of buying bias in the market. With this, we expect the mixed trading sentiment in the market, however, with a bullish bias.                                                     

Stock Watch: NB has risen 13.80% in the six sessions since the release of it’s better-than-expected H1’17 results – PAT up 25% y/y. The stock currently trades at an all-time high of ₦190.05 and has returned 28.42% ytd.                                                          

Bears dominate amidst constrained liquidity                                                    

With the CBN pausing its OMO auctions, Inter-Bank Call rate declined 167bps to close at 25.00%. Amidst a relatively tight system liquidity, the T-bills market turned bearish with yields advancing 12bps on average. Activities in the bond market turned largely bearish with yields on benchmark maturities advancing 9bps on the average. We expect an OMO auction in today’s session in anticipation of tomorrow’s maturity, we foresee another bearish trading session as liquidity continues to constrain demand.