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The Market Today - 22 January 2019

Monetary Policy Committee expected to HOLD MPR                                                    

With the two-day meeting of the Monetary Policy Committee (MPC) concluding today, the general expectation is a HOLD decision on all policy rates. The first MPC meeting of the year comes less than a month before the general elections, with electioneering spending expected to continue to put upward pressure on inflation. Nigeria’s Monetary Policy Rate (MPR), the benchmark interest rate, has been set at 14% since 2016. However, further inflationary pressure from electioneering activities and the potential minimum wage hike could force the MPC to raise the rate at a later meeting during the year. Although the MPC is widely expected to hold all policy levers once more, it remains unclear what the tone of the CBN governor’s address will be, with any statements of hawkish sentiment likely to signal a tilt towards an interest rate hike. Our base expectation for the year is a 50bps hike in MPR by year-end in order to maintain positive real interest rates.                                                      

Bourse reverses performance as Oil & Gas drags market                                                             

In a reversal from last week’s positive trend, the NSE ASI lost 88bps yesterday with red closes in three of the four key sectors. Amidst this, market turnover was high with value traded reaching ₦5.5 billion. Market breadth turned negative with 15 advances and 18 declines. Today’s negative close after last week’s gains might indicate the return of weak investor sentiment to the market. However, we highlight the possibility of continued bargain hunting and anticipate mixed trading today with a positive tilt.           

Stock Watch: CCNN has gained 22% in the past three sessions to settle at ₦26.90. The stock is currently trading at its year-high price and has recorded 39% gain ytd, outperforming the Industrial Goods sector (+10%).                                                         

Bond market mixed amidst anticipated bond calendar release                                 

Yesterday, the CBN held an OMO auction where it sold c.₦180 billion (₦350 offered) across the 94DTM, 178DTM and 353DTM bills at stop rates of 11.90%, 13.50% and 15.00% respectively (effective yields: 12.28%, 14.45% and 17.55%). Amidst this, the Interbank Call rate advanced 10.00% to settle at 25.33%. Pending the anticipated release of the bond calendar today, we expect a quiet trading session as investors await indication of supply at the bond auction tomorrow. Meanwhile, we anticipate tepid trading in the T-bills space as the CBN continues to conduct OMO auctions.