What To Expect From The Markets This Week - 080221

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Saturday, Febraury 06, 2021 09:00 AM / Proshare Content / Header Image Credit: EcoGraphics


  

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Nigeria: Economic Dashboard @ 050221  

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Editor's Note

Source: Proshare Research - February 06, 2021

Nigeria Economy

  • The total value of capital importation into Nigeria stood at $1,069.68m in Q4 2020. This represents a decline of -26.81% compared to Q3 2020 and a decline of -71.87% compared to Q4 2019. Similarly, the total value of capital importation in 2020 stood at $9,680.49m, compared to $23,990.05m in 2019, representing a decline of -59.65% between the two periods.


The largest amount of capital importation by type was received through Other investment, which accounted for 73.22% ($783.26m) of total capital importation, followed by Foreign Direct Investment (FDI), which accounted for 23.49% ($251.27m) of total capital imported and Portfolio Investment which accounted for 3.29% ($35.15m) of total capital imported in Q4 2020.


By sector, Capital importation by Shares dominated in Q4 2020 reaching $287.04m of the total capital importation in Q4 2020.


  • According to the Nigerian Communications Commission, Nigeria's mobile internet subscribers declined by 563,837 in December 2020, with the total number of internet users dropping to 153.87m from 154.43m in November 2020. Furthermore, it was revealed that broadband subscriptions declined by 0.12%, from 86m in November 2020 to 85.9m in December 2020.


A breakdown of mobile internet subscriber data shows that Globacom was the only mobile company that recorded an increase in the number of internet users in December 2020. Its internet subscribers rose from 39.9m in November 2020 to 40.10m in December 2020. MTN's mobile internet subscriber base declined by 408,444 subscribers to 65.35m in December 2020 from 65.76m in November 2020. Also, Airtel lost 236,306 internet subscribers, as its internet subscription stood at 41.28m in December 2020 from 41.52m in November 2020. 9mobile lost 119,547 internet users as its internet subscribers declined from 7.23m in November 2020 to 7.12m in December 2020.


  • The National Bureau of Statistics announced the commencement of the process of rebasing Nigeria's GDP in collaboration with the World Bank. Furthermore, in its bid to rebase Nigeria's GDP, it announced that it had completed the listing of establishments, a component of the National Business Sample Census.


Nigeria's GDP was last rebased in April 2014. At the time, the overall estimate of the economy size increased significantly by +89% as the estimate of Nigeria's total GDP rose from N42.2trn ($270bn) to N80.2trn ($510bn).


Global Economy

  • According to the report by China Internet Network Information Center (CNNIC), the number of internet users in the country rose by 85.4m in March 2020 to 989m by the end of 2020. The report noted that between March and the end of the year, 72.15m more people were shopping online, predominantly on mobile phones, reaching 782m. The report further noted that the proportion of internet users with a monthly income of at least 5,001 yuan ($774) rose to 29.3% in December, up from 27.6% in March while the number of people working remotely climbed by 147m from June to 346m as of December 2020.
  • The value of Australian wine exports to Europe rose by 22% in 2020 while its wine sales to the UK rose by almost 30% in 2020. There was a sharp increase in tax by China on Australian wine by 212% following a trade spat.  The sharp increase in sales to Europe helped offset the large contraction in exports to China in the last two months of 2020. The UK is now the biggest destination for Australian wine exports by volume, buying up 266m litres in 2020.
  • According to China's National Bureau of Statistics, it's official manufacturing Purchasing Manager's Index (PMI) fell to 51.3 in January from 51.9 in December. This was the slowest pace of growth in factory activity in five months. The slow pace of growth was attributed to the fresh wave of domestic coronavirus infections which led to several large cities being locked down interrupting factory activity and weighing on the services sector, including logistics and transportation.
  • Ghana's Central Bank retained its main interest rate at 14.5%. The Central Bank noted that inflation had been on a steady decline in the early months of Q4 2020 but rose to 10.4% outside its target range of 8%, plus or minus 2 percentage points.   Furthermore, the Central Bank projected that headline inflation would return to target in Q2 2021 as risks to inflation in the near-term were broadly contained.


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Commodities Market

Weekly Review and Outlook

Energy

  • Oil prices inched up by 1% on Tuesday after major producers showed they were cutting crude output in line with their commitments on restraint, supporting a bearish market by weak demand during the coronavirus pandemic.
  • Oil prices extended gains on Thursday after OPEC+ alliance of major producers stuck to a reduced output policy, and as crude stockpiles in the United States fell to their lowest levels since March last year.
  • Oil hit its highest level in a year on Friday, closing in on $60 a barrel on economic revival hopes and supply curbs by producer group OPEC and its allies.
  • Brent had a weekly growth of +6.53% (see Table 1). 

 

Metals

  • Gold gained on Friday, recovering from more than two-month low on Thursday due to stronger dollar and a monthly update on U.S. employment that came in slightly weaker than expected.
  • Gold depreciated by -2.61%, while Silver also dipped by -0.48% W-o-W (see Table 1).

Agriculture

  • Cocoa prices depreciated by -3.28% this week.
  • Corn prices inched up by +1.01% W-o-W while Sugar appreciated by +2.92% (see Table 1).


Table 1Weekly Change in Commodity Prices

Commodity

05-Feb-21

29-Jan-21

31-Dec-20

Weekly Chg

YTD Chg

Brent

59.57

55.92

51.8

6.53%

15.00%

Gold

1808.99

1857.38

1898.67

-2.61%

-4.72%

Silver

26.85

26.98

26.4011

-0.48%

1.70%

Cocoa

2448

2531

2597

-3.28%

-5.74%

Corn

548.75

543.25

484

1.01%

13.38%

Sugar

16.24

15.78

15.28

2.92%

6.28%

Source: Bloomberg, Proshare Research

*Data for 5th Feb 2021 is as of 5:26 pm (Nigerian Time)

 

Outlook

  • In the coming week, oil prices are expected to be bullish amid signs that the pandemic is starting to ease globally, with expectations of US stimulus package also inspiring confidence among investors that the economic climate will soon improve.
  • Gold prices are expected to be bearish in the coming week, with higher bond yields and strengthening U.S. dollar expected to weigh on the yellow metal.
  • Hedge selling related to trade in Ivorian cocoa in the physical market is expected to exert downward pressure on cocoa in the coming week as well as a slowdown in demand driven by COVID-19 pandemic.
  • Sugar prices expected to be little changed next week as the dollar keeps strengthening and low-intensity truckers protests persists in Brazil.
  • Corn prices to be bullish in the coming week, as high demand for US corn from china continues.


Fixed Income and Money Market 

  

Money Market

Money market rates were relatively higher this week despite robust system liquidity, this was driven majorly driven by funding obligations and OMO bill auction. At the close of the trading session this week, Open Buyback (OBB) closed at 17.50% while Overnight (O/N) rates closed at 18.00% indicating a Week-on-Week (W-o-W) significant rise of +66.67% for OBB and +63.64% for O/N rates.

 

Money Market Rate

 

29-Jan-21

05-Feb-21

% Change

OBB

10.50%

17.50

+66.67%

O/N

11.00%

18.00

+63.64%

Source: FMDQ, Proshare Research

 

Rates are expected to continue in this trend higher with the CBN rolling out OMO bill auction and other funding obligations.

 

Treasury Bills Market

Most of the trading session for the Nigerian Treasury Bills market (NTB) for the week was mixed. At the start of the week, the average benchmark yield rose by 21bps to settle at 1.19%. During the week, there was renewed interest in the mid to long end of the curve of the NTB.

 

At the close of the week, the average benchmark yields for the T-bills fell W-o-W by -1.90% to close at 1.03% while OMO bills also rose by +18.18% to close at 1.95%. Yields for the CBN Special Bill rose significantly by +44.23% to close at 0.75% at the close of the week.

 

Average Benchmark Yields

29-Jan-21

05-Feb-21

% Change

T. Bills (%)

1.05

1.03

-1.90%

OMO Bills (%)

1.65

1.95

+18.18%

SPEB

0.52

0.75

+44.23%

Source: FMDQ, Proshare Research

 

The CBN issued a total of N71.66bn at the OMO bills auction in the week which is lower than N100bn offered. The 89-day, 180-day, and 362-day notes were allotted at 7.00%, 8.50%, and 10.10% respectively which is the highest in over 9months.

 

Participation in the NTB market is expected to be bearish as a result of the outcome of the OMO bill auction and CBN raising stop rates to attract and retain an interest in the Nigerian local instruments.

 

FGN Bond Market

The overall trading session for the FGN Bond market for the week was bullish. Overall average benchmark yields closed at 4.28% for the week which increased W-o-W by +3.92% with sell interest seen more at the short end of the curve.

 

Average Benchmark Yields

 

29-Jan-21

05-Feb-21

% Change

Short Tenor (%)

1.88

2.17

+15.43%

Mid Tenor (%)

6.08

5.82

-4.28%

Long Tenor (%)

9.52

9.16

-3.78%

Source: FMDQ, Proshare Research

 

We expect the market to trend on a quiet note as yield opportunities thin out.

 

FGN Eurobond Market

The Nigerian Eurobonds started the week on a positive note as crude oil continued to hold steady. The average benchmark yield fell marginally by 2bps to 5.66% at the beginning of the week. This bullish trend continued throughout the week which was supported by the steady rise in crude oil prices.

 

We expect the market to continue to react to the news on Oil prices and COVID-19 cases.

 

Foreign Exchange Market

It was a bearish market for the Naira this week against major currencies and at the different windows. The Naira declined by -0.52% against the USD at the I & E FX window, for the BDC market it declined by -0.21%.

 

The Naira closed the week at $/N396.17 at the I&E FX window, at the NAFEX (spot market) it closed at $/N395.57, and at the BDC market, it closed at $/N478, £/N650, and Euros/N575. 



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Nigerian Capital Market

  • The Nigerian Stock Exchange closed negative for the five trading sessions this week amidst sell pressure as Investor Sentiment on the market was negative, the equities market closed with a decline of -1.66% as investors lose N367.98bn in Market capitalization W-o-W. YTD return and market capitalization currently stands at +55.39% and N21.82trn.


  • The volume and value of stocks traded on the exchange this week dipped by -28.02% and -15.35% respectively. A total turnover of 2.77bn shares worth N29.88bn in 31,380 deals was traded this week by investors on the floor of the Exchange; The most traded stocks by volume were UBN, FIRSTBANK, and TRANSCORP accounting for 859.87m shares worth N4.25bn in 2,459deals, contributing 31.08% and 14.32% to the total equity turnover volume and value respectively.


  • Performance across sectors was broadly negative for the week, NSE Insurance was the highest decliner for the week with a loss of -6.01%, NSE Oil & Gas, NSE Banking, NSE Consumer goods, NSE-30 and NSE-IND dipped this week by -0.16%, -2.28%, -3.22%, -1.85% and, -2.07% respectively.



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Chart 1: Movement of NSEASI Index Points 29 Jan.2021 - 05 Feb.2021 



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NASD OTC

 

The NASD OTC Security Index (NSI) and Market Capitalization closed the trading week with a negative movement in Market capitalization and NSI. The NSI and Market capitalization closed the week at 725.29 points and N520.41bn with a decline of 0.01% and -0.01% respectively.

 

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Dangote and Toni Index 

 

Dangote Index closed the week negative at 122.33 basis points from 126.01 basis points recorded the previous week, a decline of -2.92%%. DANGCEM and DANGSUGAR recorded a decline in share price by -2.54% and -9.41% respectively while NASCON  closed flat WoW. DANGSUGAR recorded the highest decline W-o-W.

 

Table 2: Dangote Index W-o-W Change

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Furthermore, the Toni Index closed negative at 102.94 basis points from 109.49 basis points recorded the previous week, a W-o-W decline of -5.98%UBA, UBCAP, TRANSCORP, AFRIPRUD and TRANSCOHOT all closed the week negative with -6.63%, -2.71%, -1.96%, -4.56%, and -9.72% respectively.

 

Table 3: Toni Index W-o-W Change

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Outlook

Given the bearish sentiment and breadth on the market this week, we envisage that the market correction currently happening will be sustained in the coming week as investors continue to take profits.

In addition, we expect astute investors to be cautious and make a re-entry as companies release their full year 2020 earnings.



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Check out our Events Calendar for event details and follow us on WebTVAPP and Social Media for updates as the week unfolds. Yours to Serve!


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