Market And Economic Update: Weekly Market Report

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Market And Economic Update: Weekly Market Report
Market And Economic Update: Weekly Market Report

Last Week, the NBS released the Inflation Report. The Consumer Price Index (CPI), which measures inflation rose by 15.99% Year-on-Year (YoY) in Oct’21.

This is 0.64% lower than the rate recorded in Sept’21 (16.63%). The headline inflation rate eased for a seventh consecutive month as both food inflation and core inflation rose lower than the previous month. Also, on a month-on-month (MoM) basis, the Headline Index increased by 0.98% in Oct’21, this is 0.17% lower than the rate (1.15%) recorded in the previous month. With both food and core sub indices on the downtrend, monthly headline inflation declined.

The yearly and monthly headline, food and core inflation rates rose at a slower rate in the review month, as the impact of high base effect persists. While the food sub index closed lower majorly on the back of the main harvest season in both the North and South, the core sub index drew support from easing FX pressures due to improved supply as well as some supply chain normalization.

Also, Nigeria sustained the growth trajectory seen in the last three quarters, as the economy recorded a real growth rate of 4.03% y/y in Q3’21. This represents a decline of 0.98% when compared to the preceding quarter (5.01%), but reflects a sharp uptick of 7.65% relative to the growth rate recorded in Q3’20 (-3.62%). This strong upswing continues on the back of low base effect, as the economy continues to leverage on the rebound in industries.

Elsewhere, the Minister of Finance (MoF), Zainab Ahmed, has informed the National Economic Council (NEC) that the CBN has started the processing of the N656.1bn Bridge Facility (a budget support facility for the 36 states). The approved Bridge facility will be disturbed in six tranches over six months to the states, with each state expected to receive a total loan amount of N18.2bn, with a 30-year tenor and a 2-year moratorium at 9% interest rate.

Global and Emerging Market Economic Updates
In the past week, U.S. President Biden officially signed the $1.2tn bipartisan infrastructure bill. The bill seeks to inject funds in infrastructure spending in the U.S. economy over eight years. Also, the House of Representatives passed the largest expansion of the social safety net in decades, at $1.75 trillion.

In addition, the U.S. Department of Labour Data showed that initial jobless claims for the week ended 13th November 2021 totaled 268,000. This figure represents a decrease of 1,000 compared to the total of 269,000 printed in the prior week. The continuing claims drop by 129,000 to a pandemic-era low of 2.08mn.

Elsewhere, in China, the real estate sector struggles remained the major point last week. Housing sales declined by 21.2% m/m in Oct ’21. Also, the People’s Bank of China unveiled a RMB200.00bn targeted lending program aimed at the domestic coal sector.

The International Energy Agency revised upward its November oil market report as its average crude oil price assumption for 2022 to $79.40/barrel (S2.60 higher than the last month’s month) but predicted that the price rally witnessed in recent times may ease off on the back of an imminent increase in global production. The upwardly revised assumption is predicated on a sustained demand for oil due to gasoline consumption and increasing international travels as more countries reopen their borders.
In addition, Brent Crude oil declined by 3.99% to $78.89/b amid speculation that the U.S. and China will release oil from their Strategic Petroleum Reserve to tame the surge in gasoline price.

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The Nigerian Equities Market
The NGX ASI closed the week in red by 0.12% as it closed negative in 4 of the 5 trading sessions during the week as a result of sell pressures in bellwether stocks such as TOTAL (-9.97%) and NGXGROUP (-11.88%). Consequently, at 43,199.27 points, the equities market’s Year-to-Date return improved to 7.27% as market capitalization decreased by 0.13% to close at N22.54 trillion.

Market breadth (a measure of investor sentiment) weakened last week, decreasing from 0.75x to 0.31x as 15 stocks appreciated against 49 stocks that declined. VITAFOAM and ETRANZACT topped the market gainers with 17.11% and 10.00% WoW respectively, while CUTIX and NGXGROUP were the top losers with declines of 42.68% and 11.88% respectively WoW.

The activity level was mixed as the trade volume declined by 5.37% while the total value increased by 33.16% respectively WoW. A total turnover of 1.392 billion shares worth N27.886 billion in 19,990 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities by volume were FBNH, GTCO and STERLNBANK. They accounted for 638.319 million shares worth N8.542 billion in 4,116 deals; contributing 45.85% and 30.63% to the total equity turnover volume and value respectively.

Market And Economic Update: Weekly Market Report
Market And Economic Update: Weekly Market Report

Outlook for the week
We expect bullish momentum to return in the coming week as the equities market still presents decent opportunities for investors chasing positive real return on investments.

The Nigerian Fixed Income
There was relatively bullish sentiment in the bond market last week as three (3) of the five (5) tenor yields under coverage closed lower while the yield on the 10 and 30-Year tenor bonds increased by 8bps and 1bp WoW. The yields on the 1, 3, 5-Year tenor bonds declined by 1bp, 88bps and 15bps respectively WoW.

Also, the activity in the Nigerian Treasury Bills Market closed in bullish form as the 182 and 364-day paper declined by 0.01% and 0.27% respectively WoW while the 91-day paper closed flat at 4.04%.

In the Money Market space, the Open Buy Back (OBB) and Overnight (O/N) rates increased to 19.00% and 20.00% from 14.50% and 15.25% respectively WoW.

Outlook for the week
We expect market activity in the fixed income market to be influenced by liquidity levels and foreign investor participation.