BREAKFAST REPORT: THE WEEK AHEAD, STOCK WATCH & RECOMMENDATIONS FOR THE WEEK

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In a recent interview with Bloomberg, Nigeria’s minister of state for Petroleum, Emmanuel Ibe Kachikwu stated his belief that the current OPEC deal will be extended well into 2019 if crude prices continue to hover around the $70/bbl range. OPEC’s Monitoring Committee will meet this month to deliberate on the effectiveness of the current deal and either make adjustments or keep things constant. However, Kachikwu believes that most participants are comfortable with the current deal and might only be willing to budge if the price soars above $80/bbl or below $65/bbl. He also believes that China’s current trade war would not materially affect crude demand from the communist state, as he expects the country’s economic relationships with other emerging markets to sustain demand.

Equity:

Recording the largest value traded since 31 May (₦9.79 billion), negative sentiment drove the equity market further southward on Friday, down 68bps. With four out of five sessions in the week closing in negative territory, the ASI closed out August with a 163bps w/w and 586bps m/m decline. We expect trading in the new month to begin on a weaker note as investors remain pessimistic in the short-term. We also highlight that recent earnings releases did little to improve market sentiment, further evidence of the pre-election blues.

Stock Watch:

PZ released its FY’18 results on Friday, showing a 3% y/y rise in revenue to ₦80.5 billion, however, PAT declined 48% y/y to ₦1.9 billion, 13% below our estimate. The stock is currently trading at ₦21.68, down 27.18% YTD.

Fixed Income:

Buoyant liquidity should spur further buying today, though this would be capped by any CBN liquidity mop up. Meanwhile, the bearish trend in the bond market should persist as investors remain wary of long-term instruments.

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