Saturday, October 31, 2020 07:40 AM / Proshare Content / Header Image Credit: EcoGraphics
Nigeria: Economic Dashboard @ 301020
Source: Cordros Weekly Economic and Market Report - October 30, 2020
stocks stumbled as investors were rattled by a new wave of COVID-19 lockdown
measures which threatened a benign economic recovery, outweighing
better-than-expected Q3-2020 earnings released during the week. In the US, the
DJIA (-5.9%) and S&P (-4.5%) were on track for another weekly loss, as
earnings-driven rebound on Thursday which waned on Friday failed to wipe off
losses accumulated earlier in the week due to coronavirus fears and election
uncertainty. In Europe, the STOXX Europe (-6.3%) and FTSE 100 (-5.4%) were on
track to close the week in the red, as the tightening of restrictions on
economic activities in Germany and France sparked sell-offs despite better than
expected growth figures for the bloc economy in the third quarter. Asian
(Nikkei 225: -2.3%; SSE: -1.6%) markets were poised to end the week in the
negative territory as investor sentiment was laced with a tapestry of altering
global economic outlooks and jitters over the U.S presidential election.
Emerging market (MSCI EM: -2.7%) stocks were broadly bearish following losses
in Brazil (-4.6%) due to COVID concerns while Frontier markets (MSCI FM: -0.5%)
were down following losses in Vietnam (-3.7%).
bullish momentum in the local bourse switched into a higher gear as investors
hunted for bargains following broadly positive corporate earnings released
during the week. Activities recovered from the two-week slowdown, as the value
and volume of trades grew 20.0% w/w and 26.8% w/w respectively. Accordingly,
the All-Share Index broke through 30,000 psychological mark, a level last seen
in June 2019, and closed at 30,530.69 points, the highest level in 15 months.
Notably, investors' interest in NESTLE (+21.0%), BUACEMENT (+11.3%), GUARANTY
(+6.7%), DANGCEM (+5.9%) and STANBIC (+5.7%) drove the benchmark index 6.4%
higher, its sixth-consecutive weekly gain. The MTD and YTD return for the index
grew to 13.8% and 13.7%, respectively. Performance across sectors was an
all-round positive, as the Consumer Goods (+12.2%) index topped the gainers'
chart trailed by the Banking (+8.0%), Industrial (+7.6%), Oil and Gas (+6.2%)
and Insurance (+5.6%) indices.
We expect the direction of market performance to be shaped by the ongoing Q3 earnings season as investors look for evidence that the relaxation of lockdown has provided a tailwind for corporate earnings. With yields on risk-free assets declining to sub 1% levels, we believe it is increasingly compelling for risk-averse investors to rotate their portfolio towards equities. Hence, we expect the bulls to maintain dominance in the week ahead.
as we predicted last week, activities in the Treasury bills secondary market
slowed due to the rock bottom yields in the market, and as market participants
shifted their focus to the NTB PMA that held on Wednesday. Consequently, the
average yield across all instruments expanded by 5bps to 0.5%. Across the
segments, the average yield on instruments in the OMO market was flat at 0.5%,
and expanded by 12bps to 0.5% at the NTB secondary market, as a result of the
preceding factors. At Wednesday's PMA, the CBN offered bills worth NGN154.38
billion with allotments of NGN7.50 billion of the 91-day, NGN6.00 billion of
the 182-day and NGN140.87 billion of the 364-day - at respective stop rates of
0.34% (previously 1.00%), 0.50% (previously 1.00%), and 0.98% (previously
We expect investors to remain wary of T-bills at this level, thus we expect yields to remain rangebound, as demand for instruments in the space slows.
Treasury bonds secondary market remained bullish, as investors re-invested the
excess liquidity from OMO maturities and FGN bond coupons. Liquidity in the
market was thin as very few sellers were willing to take profit. Consequently,
the average yield across instruments contracted by 16bps to 4.1%. Across the
benchmark curve, most investors were keen on short (-31bps) tenor instruments,
as they bought up the JAN-2022 (-78bps) and APR-2023 (-55bps) bonds. Further
down the curve, average yield also declined at the mid (-6bps) and long
(-13bps) segments, as buying interests were recorded on the FEB-2028 (-56bps)
and MAR-2036 (-25bps) bonds, respectively.
We expect trading in the Treasury bonds secondary market to remain bullish, as FGN bonds represent the only preferable alternative for fixed income investing.
FX reserves increased by USD16.36 million w/w to USD35.69 billion, as inflows
into the reserves offset outflows for CBN's interventions across the various FX
windows. Across the windows, the naira closed flat against the US dollar at
NGN386.00 at the I&E window (YTD: -5.6%), while it strengthened by 0.2% to
NGN462.00/USD in the parallel market (YTD: -21.6%). In the Forwards market, the
naira appreciated across the 1-month (+0.1% to NGN386.25/USD), 3-month (+0.2%
to NGN386.69/USD), 6-month (+0.2% to NGN388.33/USD) and 1-year (+0.7% to
Going forward, we expect CBN's FX management strategies to continue supporting the naira at its current level at the official and I&E windows. However, we believe the parallel market rate will remain volatile and continue to trade above the CBN's Relative Purchasing Power Parity (RPPP) of NGN433.64/USD and our REER fair value estimate of NGN453.67/USD at the current level of intervention in the FX market.
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