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The Market Today - June 2 2017

May PMI readings indicate market expansion
According to the Central Bank of Nigeria (CBN), the Manufacturing Purchasing Managers’ Index (PMI) for the month of May printed at 52.5, indicating expansion for the second consecutive month. The NonManufacturing PMI also came in above the 50-threshold, printing at 52.7 after sixteen consecutive months of m/m contraction. Notably, employment levels in both Manufacturing and Non-Manufacturing sectors expanded for the first time since early-2015. We point to recent developments – easier access to foreign exchange (FX) as a result of multiple windows created by the CBN, a recuperating oil & gas sector, and slowly increasing confidence in near-term economic prospects could possible explain this improvement. We expect the recent efforts to improve the ease of doing business in the country (spearheaded by the Acting President) to further aid economic expansion. Also, the executive orders to increase government efficiency and legislative directives to expand credit to MSMEs should support economic recovery going forward. However, persistent inflation pressure (May forecast: 15.8%) remain a worry and will continue to pressure business margins and consumer wallets. Nevertheless, bolstered by recent PMI numbers, we expect an economic rebound (2.1% y/y) in Q2’17.

ASI surges past 30,000 points at start of June
Bolstered by strong gains in bellwethers, the Nigerian equity market closed 277bps higher on the first day of the month, sailing past 30,000 points – a near one-year high – and stretching gains to seven sessions. With several blue chips remaining on the bid cart at market close, we expect buying interest on the exchange to remain strong and foresee another green close for the ASI.

Stock Watch: Applications to UPDC’s rights issue closed last week Friday. Whilst the embattled Property developer was down 35% at April close, the stock has rallied 39% since then to ₦2.51, trimming ytd losses to 4%.

Bulls dominate T-bills market amidst liquidity boost
With stop rates at Wednesday’s PMA coming lower than secondary market levels on the short and medium ends, the bills market sustained bullish trading with yields declining 24bs on average. In contrast, the bond market traded slightly bearish in a relatively muted session, with yields rising on select maturities. Barring further mop ups, we expect liquidity to further support buying interest in the bills space. Meanwhile, we foresee further muted trading in the bond space at week close.