April 10, 2017/InvestmentOne Research

Trade ideas for the week

• We remain positive on both quality Banking and cement stocks on continued elevated interest rate regime and potential for increased government capex spending.
• We continue to sell Consumer names on pressure on disposable income and limited FX supply for input materials.
• Though we expect the ASI to remain volatile on concern regarding the weak macro backdrop, we see support to market performance from a likelihood of policy shift in the FX regime..

§  Hence, we advise investors to tread with caution and gradually build position in quality names for an extended investment horizon.

• We overweight FI instruments, as rising yields present good entry point.

Our Picks

• Dangcem, GTB, Zenith, Access and  Nestle
  

The week in review

• ASI  gained  +0.90% (90bps) w/w
• Yields on FGN bonds  remained at 15% level
• At the parallel market, Naira depreciated by -3.7% w/w against the USD to end the week at N405.
• FG formally launched the Economic Recovery and Growth Plan, projected +7% growth by 2020
• Brent oil price jumped to $55pb level after US attacked Syria.

The week ahead

• NBS to publish March inflation report by 13^th of April
• DANGSUGAR to mark down for 60k dividend today
• DMO to offer N135bn worth of FGN bonds to investors.

Thoughts for the week

§  At the tail end of outgone week, Brent oil price rose to $55pb level with support from surprised US attack on Syria which threatens Middle East oil supply and increases global geopolitical risk. While the uptick in price may be short-lived if the perceived threat to supply and geopolitical risk do not materialize, we see the jump in price as a positive for the country. This is more so as recent calmness in the Niger Delta which had seen some level of recovery in Nigeria production could further boosts oil earnings, government spending capacity as well as reserve accretion. In addition, increased accretion to the FX reserve could support NGN/USD rate at the interbank market as CBN’s ability to continue its intervention sales would be enhanced.