April 24, 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.
- While index performance remains susceptible to weak macro backdrop and threat of MSCI eviction of Nigerian equities, we expect market performance to be impacted by investors’ response to the new CBN’s window for investors and exporters.
§ Having said that, we advise investors to tread with caution and gradually build position in quality names for an extended investment horizon.
Our Picks
- Dangcem, GTB, Zenith, Access and Nestle
The week in review
- ASI shed -1.26% (120bps) w/w
- Yields on FGN bonds expanded across tenors on liquidity squeeze
- At the parallel market, Naira strengthened by +6.5% w/w against the USD to end the week at N385.
- Brent oil price slumped to $51pb level on US shale output surge.
The week ahead
- NBS to publish Q1 2017 Financial Service Data
- MOBIL to mark down for 800k dividend during the week
- OMO maturity of c.N52bn expected to hit the system on Thursday.
Thoughts for the week
§ At the tail end of outgone week, the CBN released a circular on the proposed opening of a special FX window for investors and exporters. One of the key operational requirements for the new FX window provides for exchange rate determination between willing buyers and sellers. This in our view has created a semblance of market and thus jettisons the previous arrangement when price points are dictated by the regulators. However, downside risks remain from lack of policy credibility given CBN’s antecedent of interfering with market situation
