What To Expect From The Markets This Week- 111119


Saturday, November 09, 2019 07:50 AM / Proshare Content

Nigeria: Economic Dashboard @ 011119  

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Source:  Cordros Weekly Economic and Market Report - November 08, 2019

Global economy

The impact of trade tensions and weakened global demand continued take a toll on trading activities in China. From a year ago, export shrank by 0.9% y/y, printing the third consecutive month of declines.  Perusing the breakdown provided, exports to the US, which constitutes 19.2% of total China's exports fell by 16.2% y/y. Furthermore, exports to Japan and Australia also declined by 7.8% y/y and 0.6% y/y, respectively. Similarly, for the sixth consecutive month, imports dipped by 6.4% y/y. Imports from the US dropped by 14.3% y/y. Looking ahead, we expect the possible trade deal between the US and China to lift existing trade tariffs to support improved trade position in coming months.
According to the Federal Statistics Office, Germany's trade balance for September printed +15.9% y/y, the largest expansion in three months, providing some respite for Europe's largest economy which has suffered from the indirect impact of the U.S-China trade war. Exports swung from a negative terrain in the prior month to +4.7% y/y, the largest expansion in five months. Improved exports were largely driven by increased demand from EU member states, which absorbed 59.9% of the total exports. In the same vein, imports widened by +2.2% y/y, the first growth recorded in five months, driven by improved domestic consumption. While we don't believe the export-reliant economy is completely out of the woods, the reading underscores a possibility of improved economic growth in Q3-19. Furthermore, festive induced demand in November and December is expected to boost export and overall trade position in last quarter of the year.
Global markets
For a third straight week, appetite for risk assets across the globe has been consistently encouraging. This is hardly surprising, given the growing optimism that the US and China will roll back some of the tariffs currently in place should the phase 1 trade deal get a nod. More so, monetary policy accommodation across developed markets, which continues to boost equity valuations, has inspired renewed hope among equity investors, in our opinion. For clarity, equity markets across our coverage universe were set to close the week in the green - US (DJIA: +1.2%, S&P: +0.8%), Euro Area (FTSE: +1.0%, Euro Stoxx: +2.1%), and Asian (CSI 300: +0.5%, Nikkei: +2.4%) markets. Furthermore, even as the frontier market (MSCI FM: +0.0%) stocks were flat, Emerging market (MSCI EM: +2.3%) equities posted a strong return, supported by solid outturn in South Korea (+1.8%), Taiwan (+1.3%), and Brazil (+1.3%).

As part of the FGN's policy surrounding the closure of all land borders in Nigeria, it was announced that the FGN has suspended the supply of petroleum products to filling stations within 20km of all land borders. Cross border smuggling of PMS, which is solely imported by the NNPC, has aggravated pressure on Nigeria's finances via higher petrol importation, and thus, greater subsidy payments. In September and October, domestic PMS consumption declined by 0.4% and 11.7% m/m, respectively. This, we believe is linked to a reduction in illegal exportation of PMS to neighbouring West African countries where PMS is sold at more than a 2x premium. Data from Global Petrol Prices, shows that PMS sells for USD0.40 in Nigeria, when compared to Benin (USD0.91), Togo (USD0.96), Chad (USD0.88) and Cameroon (USD1.07). Against that backdrop, if border closure is sustained, our estimates suggests an annual subsidy saving of NGN105.55 billion.
Capital markets
Amidst recent CBN's policies directed towards stimulating growth, the impact of which has significantly softened fixed income yields to just above inflation levels, buying interest in stocks with attractive dividend yields, and sizeable upsides, led the Nigerian equities market to a positive close for the first time in eight weeks. Gains in trading sessions at both ends of the week drove the All-Share Index up by 0.1% w/w to 26,314.49 points, and reduced the YTD loss to 16.3%. On sectors, the Banking (+8.5%) index recorded its highest gain since the week ended  23 August 2019 driven by interest in Tier I Banks stocks. The Industrial Goods (+2.1%) index followed suit with CCNN gaining 10.6% w/w on the announcement of its merger with Obu Cement; the Insurance (+0.4%) index also closed positive. Conversely, the Consumer Goods (-5.9%) and Oil & Gas (-0.4%) indices closed in the red.
In our view, the market is a reflection of investors' views about the expectations for the economy given the still uninspiring macro story. Nonetheless, we expect the market might benefit over the short-term from recent policy directions as investors seek alpha-yielding opportunities in the face of lower yields in the fixed income market.
Money market
Average system liquidity, although still robust, declined slightly this week (NGN409.33 billion vs. NGN421.33 billion last week), following outflows from FX and OMO (NGN232.45 billion) auctions which offset the inflows from OMO maturities (NGN403.85 billion) towards the end of the week.  Consequently the overnight (OVN) rate rose by 150bps w/w to close at 5.57%.
In the coming week, OMO maturities (NGN405.92 billion) are expected on the 14th of November, which should support system liquidity and keep the rate tethered. Also, the substantial liquidity position of the market (NGN737.55 billion) further substantiates our expectations for the coming week.
Treasury bills 
Trading in the Treasury bills market was bearish, as the effects of the CBN's directives on OMO bills continued to reverberate in the market. Trading volumes were very sparse, with total volume traded declining 23.0% to NGN1.03 trillion. Foreign investors remained net sellers of Treasury bills, as they opted to go for the more attractive OMO bills at the auction. Consequently, the average yield widened by 68bps to 13.1%. 
Amidst the persisting illiquidity in the NTB market, we expect yields to pare next week as local players seek to reinvest significant maturities expected. At the NTB PMA, the CBN will offer NGN125.24 billion worth of bills to investors.
Activities in the bond market remained bullish as local PFAs and Asset Managers sought to re-invest OMO maturities and other excess funds amidst the illiquidity of the NTB market. Consequently, the average yield pared by 27bps to settle at 12.9%. Also, there were yields declines across all trading instruments in the week, signal to the increased interest from investors, with the APR-2023 instrument (-99bps) recording the largest decline in yield.
We expect recent developments in the Treasury bills space to provide active trading at the bond market as investors' look for alternatives. Additionally, market players will look to invest an expected NGN59.12 billion in coupon payments. In effect, yield are expected to trend downwards.
Foreign exchange

Nigeria's FX reserves continued its descent, declining by USD20.24 million WTD (06 Nov 2019) to USD40.23 billion, the lowest since 23 January 2019. Meanwhile, the CBN sustained its weekly FX intervention, selling USD210.00 million across the different segments of the FX market - USD100.00 million to the Wholesale segment, USD55.00 million to the SMEs segment, and USD55.00 million to the Invisibles segment. Nonetheless, the naira depreciated by 0.18% WTD to NGN362.75/USD at the I&E window but closed flat at NGN360.00/USD at the parallel market. Elsewhere, total turnover at the I&E window increased by 28.85% WTD to USD1.19 billion, with trades consummated within the NGN357.00 - 362.75/USD band. In the Forwards market, the naira weakened across all contracts - 1-month (-0.1% to NGN361.12/USD), 3-month (-0.3% to NGN369.67/USD), 6-month (-0.5% to NGN384.49/USD) and 1-year (-0.3% to NGN410.70/USD).

Looking ahead, we expect sustained CBN's intervention to keep the naira resilient in the short to medium term. Thus, our estimate suggests no naira devaluation in 2019. 



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Sunday, November 10, 2019

The Association for Tourism Development in Nigeria Multidisciplinary Conference (ATDiN) will on this day begin its conference with the theme: Beyond Rhetoric and Idealism: Propelling a Pragmatic and Sustainable Tourism Industry in Nigeria at the University of Nigeria Nsukka, Enugu State.


Tuesday, November 12, 2019

The 2019 Future Energy Nigeria will on this day begin its Conference and Expo at Eko Hotel and Suites, Victoria Island, Lagos while Annual Pension/Admin Conference (APAC) will hold on this same day at Bayelsa State Guest House, Abuja.


The China Brand Show will begin its conference and exhibition on this day at the Federal Palace Hotel, Victoria Island, Lagos, while the Nigeria International Brand Expo will also begin on this day at the Landmark Event Centre, Lagos, just as the Nigerian Institute of Medical Research International Scientific Conference will begin on the same day at the Nigerian Institute of Medical Research, Lagos.



Wednesday, November 13, 2019

Phillips Consulting Limited will on this day hold its Webinar on Smart Competency-Based Recruiting.


Thursday, November 14, 2019

The Hague Institute for Innovation of Law will on this day introduce the finalists of the Innovating Justice Challenge at the Consulate-General of the Kingdom of the Netherlands, 14A Walter Carrington Crescent, Victoria Island, Lagos. 

The Nigerian Institute of Chartered Arbitrators will on this day hold its 40th Anniversary, while the Annual Conference and Investiture Award Ceremony with the theme:  Building a Culture of Arbitration & Sustainable Institution in West Africa will hold at the Eko Hotel and Suites, Victoria Island, Lagos.

The Social Innovators Programme Awards (SIPA) will hold on this day with the theme: People, Profit, Planet: The Tripartite Win at the Shell Hall, Muson Centre, Onikan, Lagos, while the Medical Women's Association of Nigeria Lagos State Chapter will on this day begin its 21st Biennial Conference, Annual General Scientific Meeting and Investiture of the 22nd President with the theme: Advancing the health of Nigerians at MRC Auditorium, Lasucom, Ikeja, Lagos.

The National Bureau of Statistics will on the same day release the CPI and Inflation Report October 2019, Daily Energy generated and sent out (Q3 2019), Daily Energy Generated and sent out and Consumed and Load Allocation (Q3 2019),  Federation Account Allocation Committee (FAAC) (October 2019 Disbursement), Internally Generated Revenue at State Level ( Half Year 2019), Liquefied Petroleum Gas (Cooking Gas) Price Watch October 2019, NATIONAL HOUSEHOLD KEROSENE PRICE WATCH October 2019, SELECTED FOOD PRICES October 2019 and Transport Fare Watch (October 2019)


Friday, November 15, 2019

The Africa Youth Leadership & Economic Summit will on this day begin its 5TH LCCI Women Group Conference Digital Revolution with the theme: Youth Entrepreneurship; Creating Partnership at Golden Tulip Hotel Festac, Lagos, while the National Bureau of Statistics will on the same day release the Premium Motor Spirit (Petrol) Price WATCH October 2019


The Nigeria-British Chamber of Commerce will on this day hold its Presidential dinner and Inauguration at Eko hotel and Suites, Victoria Island, Lagos, while the Nigerian National Co-operative Awards, Symposium and Exhibitions will also hold on this day at Bolingo Hotel, 777 Independence Avenue, Abuja.


The Nigeria Bureau of Statistics will on this day release the NATIONAL HOUSEHOLD KEROSENE PRICE WATCH October 2019


Saturday, November 16, 2019

The Nigerian Bureau of Statistics will release the NATIONAL HOUSEHOLD KEROSENE PRICE WATCH October 2019

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