August 14, 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.
- While recent rally has seen valuation a bit stretched, we still see value on quality names highlighted in our top picks below given sustained buying interest by investors.
- We expect Consumer names earnings to see support from price hike and recent reforms in the FX market.
- Going into the new week, while expectation of earnings release from the likes of UBA, ACCESS and GUARANTY could provide some level of support for the index performance, we highlight potential for profit-taking on recent gains in the index.
- That said, sustained buying interest on account recent reforms in the FX market as well as revised PFA guideline which mandates increased investment allocation to equities bodes well for ASI performance..
§ Hence, we advise investors to stick to quality names and maintain a medium to long term investment horizon.
Our Picks
- Dangcem, GTB, Zenith, UBA, Access, NB and Nestle
The week in review
§ ASI gained +2.07% w/w due to buying interest in Consumer tickers.
- Yields on FGN bond closed w/w due to squeeze on system liquidity from OMO auctions.
- NGN closed at N367 against the USD at the parallel market.
The week ahead
§ Inflow of c.N178bn OMO maturity expected on Thursday 17th August
§ NBS to release July 2017 AGO and Diesel Price Watch.
Thoughts for the week: Renewed Hope from Projected Higher Demand for Brent Crude Oil
§ In a boost to the country’s fiscal outlook, OPEC in its July monthly report released last week projected higher demand for Brent crude oil in 2018, citing support from pick up in global growth momentum
§ The cartel also hinted at further recovery in Brent crude price as its output cut deal helps in reducing excess supply glut putting downward pressure on price.
§ In line with OPEC’s optimism, Brent crude oil price has been stable at $52pb level in the last few trading days, helped by decline in US inventory level despite jump in OPEC output in July.
§ In our opinion, expectation of positive trend in Brent oil price in 2018 would be a positive for Nigeria as it will help sustain the ongoing economic recovery.
§ This is moreso as sustained sizable FX inflows into the country from oil receipts amidst gain from backward integration would help usher in the much-needed exchange rate stability. Thus, further enhancing the country’s attractiveness to offshore investors.
§ The stability in the oil sector coupled with potential increase in inflow from offshore investors would see the country’s growth momentum accelerate.
§ Downside risk however remains from political-related risks given uncertainties often associated with electioneering period.