22 June 2018 ( Lagos ) : The Organization of the Petroleum Exporting Countries (OPEC) and partner non-OPEC countries meet today to determine the fate of the current oil deal. The group is looking to ease existing output caps to compensate for declining production in countries like Venezuela, as well as improving global demand, which has raised concerns over a supply deficit in the short-term. Nevertheless, Iran, OPEC’s third largest producer and the victim of United Sanctions on oil exports, has expressed an unwillingness to alter the current arrangement and may stall discussions. We expect the deal to remain in place till year-end, with the two groups agreeing on a production increase, and we expect this to put some pressure on oil prices. 

Financial Market Update

Mixed sentiment persists in fixed income market 

Deviating from recent trend, the CBN held off on conducting an OMO auction yesterday, despite a ?378 billion OMO maturity. Consequently, Interbank call rate declined 950bps to 3.00% (previous: 12.50%). 

Interestingly, sentiment in the T-bills market remained mixed with a bearish bias, with yields advancing 6bps on average. Notably, whilst yields on the 105DTM (-47bps to 12.52%) and 224DTM (-55bps to 12.55%) bills declined, yields on the 14DTM (+41bps to 12.72%) and 133DTM (+74bps to 12.98%) bills advanced. Meanwhile, trading in the bond space was negative, with yields on benchmark bonds rising 8bps on average. In particular, yields on the 15.54% FGN FEB 2020, 10.00% FGN JUL 2030 and 12.1493% FGN JUL 2034 bonds, advanced 22bps, 23bps and 25bps to settle at 13.28%, 13.89% and 13.94% respectively. 

Barring a CBN liquidity mop-up today, analysts foresee improved demand in the market today amidst buoyant system liquidity (N478 billion). 

DANGCEM weighs on Nigerian bourse 

Losses became more pronounced on the Nigerian Stock Exchange yesterday after an early session dip in DANGCEM dragged the ASI 117bps lower. 

The Consumer Goods (+47bps) sector was the only bright spot on the day, following strong advances in NB (+275bps), DANGFLOUR (+96bps) and GUINNESS (+52bps). On the other hand, sizable losses in SEPLAT (-449bps) and ETERNA (-139bps) dragged the Oil & Gas sector 239bps under. Similarly, the Industrial Goods and Banking sectors both shed 54bps on the day after losses in CCNN (-476bps), DANGCEM (-364bps), GUARANTY (-148bps), ZENITHBANK (+115bps) and UBA (-47bps) beat out gains in WAPCO (+256bps), UBN (+351bps) and ACCESS (+97bps). 

Market breadth turned even with 26 advances and 26 declines. 

Market Outlook 

With many stocks remaining on the offer cart at market close, analysts anticipate a negative open to the market today. 

Stock Watch

FBNH has shed 5% in the last five sessions. The stock currently trades at a price of N10.60 and has returned 20% YTD, compared to the Banking sector’s flat YTD performance. FBNH was amongst the top traded stocks on the day by volume and value. 

Source: Vetiva Capital Management Limited.