The Market Today - 31 August 2018

AfCFTA deadline pressured by lack of signatories                                                           

According to media reports, the African Continental Free Trade Area (AfCFTA) deal is yet to gain the expected traction. The deal, which aims to create a common market in Africa, is supposed to come into effect 30 days after ratification by at least 22-member parliaments. However, despite an approval-in-principle by 49 countries, only seven parliaments have agreed to the terms of the deal, creating the possibility of an extended timeline. We highlight that the AfCFTA could potentially be one of the world’s largest free trade areas by number of participants and is expected to have a positive impact on intra-African trade which has been historically weak and informal. Recently, President Buhari expressed his willingness to join the agreement, albeit committing to engage necessary stakeholders before taking the step.                                                             

NSE ASI set to end the month in negative territory                                                         

Amidst sizable pressure from the Banking and Industrial Goods sectors, the NSI-ASI continued to trend southwards, shedding 77bps on the day. Driven by the sustained bearish market sentiment, we expect the market to remain in negative territory on the last trading day of the month, with August posting the second largest m/m decline so far this year (MTD: -5.2%, May: -7.7%).                                

Stock Watch: UBA released its H1’18 results yesterday with the bank recording a 10% y/y rise in gross earnings, while PAT rose by a modest 3% to ₦44 billion, 2% below our estimate. The stock gained 62bps in the previous session to close at ₦8.10 (YTD: -21%).                                                         

Yields soar as market adjusts post-PMA                                                              

"In spite of a ₦315 billion OMO maturity, Interbank call rate advanced 9bps to 10.67%, even as system liquidity rose to c.₦420 billion. Meanwhile, trading in the T-bills market turned bearish, in reaction to higher than expected stop rates at Wednesday’s PMA (rates closed 150bps higher on average versus previous levels) across all maturities. Overall, yields advanced 70bps on average across the space. Notably, yields on the 21DTM, 91DTM and 322DTM bills advanced 200bps, 135bps and 175bps to 11.57%, 11.70% and 14.27% respectively. The bond space was similarly bearish, with sell-side activity dominating the space and benchmark yields advancing 27bps on average. Notably, yield on the 15.54% FGN FEB 2020 bond rose 70bps to 14.51%.