Saturday, November 07, 2020 08:00 AM / Proshare Content / Header Image Credit: EcoGraphics
Nigeria: Economic Dashboard
Source: Cordros Weekly Economic and Market Report - November 06, 2020
Global 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 lost steam as investors took a breather to
digest corporate earnings released thus far. In terms of activity levels,
volume grew by 8.2% w/w while value declined 4.1% w/w. Supported by gains on
the second (+0.8%) and last trading (+0.9%) days, the All-Share Index crawled
above the 31,000 points psychological mark, closing at 31,016.17 points.
Notably, investors' interest in DANGCEM (+9.1%), DANGSUGAR (+19.6%), and
GUARANTY (+3.1%) drove the benchmark index 1.6% higher, its seventh-consecutive
weekly gain. The MTD return stood at 1.6% while the YTD return for index grew
to 15.6%. Performance across sectors was broadly positive. Save for the Oil and
Gas (-0.8%) which declined, the Industrial (+2.9%), Banking (+2.2%), Insurance
(+1.3%) and Consumer Goods (+0.6%) indices closed in the green.
As the Q3 earnings season winds down, we expect investors to shift their attention to yet to be published results from the big banks (FUGAZ) in the week ahead. In the short term, we still see scope for expansion in valuation multiples as hunt for alpha-yielding opportunities in the face of increasingly negative real returns in the fixed income market remain positive for stocks. However, we advise investors to take positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings.
activities in the Treasury bills secondary market picked up this week, as the
average yield across all instruments contracted by 17bps to 0.3%. Most of the
demand in the market was recorded at the OMO segment (average yield declined by
27bps to 0.2%) as local participants redirected ample liquidity towards mid and
long tenor instruments. At the NTB secondary market, notwithstanding the quiet
trading activity, the average yield in the segment declined by 4bps to 0.2%, as
retail demand supported proceedings in the space.
We still maintain our view for weak demand for T-bills, given the rock bottom yields in the space. Also, we expect the focus to be on the primary market, where the CBN will be rolling over NGN147.82 billion of the maturing bills.
Treasury bonds secondary market continued to trade with bullish sentiments, as
the buoyant liquidity in the system drove sentiments. We note that through the
week, the market remained bid with persistent demand and no sufficient offers.
Consequently, the average yield across instruments contracted by 15bps to 3.9%.
Across the benchmark curve, duration apathy continues to drive interest in
instruments on the short (-72bps) end of the curve, as investors were quite
keen on MAR-2024 (-172bps) and JAN-2022 (-136bps) bonds. Further down the
curve, average yield expanded at the mid (+3bps) and long (+7bps) segments,
following sell-offs of the FEB-2028 (+25bps) and MAR-2050 (+18bps) bonds,
In the coming week, we still expect the Treasury bonds secondary market to remain bullish, considering the relatively higher returns on instruments in the space.
FX reserves decreased by USD36.05 million w/w to USD35.65 billion, as outflows
for CBN's interventions across the various FX windows pressured the reserves.
Across the windows, the naira closed flat against the US dollar at NGN386.00 at
the I&E window (YTD: -5.6%), while it weakened by 0.4% to NGN464.00/USD in
the parallel market (YTD: -22.0%). In the Forwards market, the naira weakened
in the 3-month (-0.2% to NGN387.37/USD) contract, strengthened in the 1-year (+0.8%
to NGN389.81/USD) contract, and remained flat in the 1-month (NGN386.35/USD)
and 6-month (NGN388.41/USD) contracts.
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.
Previous Week(s) Market Outlook
4. What To Expect From The Markets This Week - 210920
5. What To Expect From The Markets This Week - 140920
Latest Reports This Past Week
12. The Rich, The Poor and Buharinomics