What To Expect From The Markets This Week - 150321

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Saturday, March 13, 2021 07:50 AM / Proshare Content / Header Image Credit: EcoGraphics


  

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Nigeria: Economic Dashboard @ 120321 

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Editor's Note

Source: Proshare Research - March 13, 2021

Nigeria Economy

  • According to the NBS, Nigeria recorded a trade deficit of N7.37trn and a total trade of N32.42trn in 2020, Nigeria's total merchandise trade stood at N9.12trn, an increase of +8.9% when compared to Q3 2020 but a decline of -9.9% when compared to Q4 2019. The export component of trade stood at N3.19trn in Q4 2020 an increase of +6.7% when compared to Q3 2020 but a decline of -33% when compared to Q3 2019.


On the flip side, total imports stood at N5.92trn in Q4 2020, an increase of +10.1% when compared to Q3 2020 and an increase of +10.8% when compared to Q4 2020. Imports accounted for 65% and exports accounted for 35% of total trade in 2020.


  • According to the Manufacturers Association of Nigeria, Manufactured goods valued at N577.61bn were unsold in 2020 as against N402.4bn recorded in 2019. In its bi-annual review of the economy, it noted that inventory unsold finished manufactured goods increased to N303.22bn in the second half of 2020 from N202.16bn in the same period of 2019 and N275.39bn in the first half of 2020. It revealed that the increase in inventory in the period could be attributed to the general low consumption and renewed imports in the economy as global economies generally opened after months of lockdown. Furthermore, it said that the Electrical and electronic sectoral group accounted for over 33% of the total inventory of unsold manufactured products in 2020.

  • To sustain the encouraging increase in inflows of diaspora remittances into the country, the CBN announced that it will commence its "CBN Naira 4 Dollar Scheme" on Monday, March 8, 2020 and that it will end on Saturday 08 May 2021. In light of this, the CBN shall through commercial banks, pay to remittance recipients the incentive of N5 for every USD1 remitted by the sender and collected by the designated beneficiary. This incentive is to be paid to recipients whether they choose to collect the USD as cash across the counter in a bank or transfer the same into their domiciliary account.

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Global Economy

  • South Africa's GDP grew by +6.3% Q-o-Q on a seasonally adjusted and annualized basis in Q4 2020. The growth was led by expansion in manufacturing, construction, and trade. On a year-on-year basis, GDP contracted by -4.1% in the three months to the end of December, compared to a revised -6.2% contraction in Q3 2020. The economy contracted by -7% in 2020 compared to +0.2% growth in 2019.
  • Trade between the UK and Germany declined in January as both countries are adjusting to life after Brexit amid the coronavirus pandemic. According to Germany's Federal Statistics Body, German exports to the United Kingdom declined by -29.0% to Euros 4.3bn in January 2021, compared with a year ago. Furthermore, German imports from the UK declined sharply by -56.2% to Euros 1.6bn compared with January 2020 before the advent of the coronavirus pandemic. Road haulage bodies have attributed the decline to the rush of stockpiling at the end of 2020 that led to huge delays at the ports.
  • The OECD has doubled its forecast for US growth in 2021 following the projected impact of the new $1.9trn stimulus spending. Its revised projection reveals that US GDP will expand by +6.5% in 2020, upon the +3.2% growth forecast in December.  Also, its growth forecast for the US economy in 2022 was revised up to +4.0% from +3.5%. Furthermore, it believes that the US stimulus package will help other neighbouring countries and trading partners such as Canada and Mexico.
  • China's factory-gate prices rose at the fastest pace since November 2018 in February as manufacturers raced to fill export orders, raising expectations for robust growth in the world's second-largest economy in 2021. The producer price index (PPI) rose by +1.7% (Y-o-Y) in February 2021. The rise is partly driven by a very low base a year earlier but also comes as the spectre of surging inflation globally rattle financial markets amid concerns the world economy recovery may overheat.


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Commodities Market

Weekly Review and Outlook

Energy

  • Oil prices settled lower on Monday, retreating from a session peak above $70 a barrel after attacks on oil facilities in Saudi Arabia lifted prices that high for the first time since the COVID-19 pandemic began.
  • On Tuesday, Oil prices fell to around $68 a barrel in a choppy session, pressured as concerns faded of a supply disruption in Saudi Arabia, which countered a pause in the dollar's rally and prospects for tighter supply due to OPEC+ output curbs.
  • By Wednesday, oil price steadied and then on Thursday prices rose more than 2% on a weaker dollar and expectations that a crude glut would be short-lived due to a steep fall in U.S. fuel stocks and a resumption of operations by Texas refiners.
  • OPEC said on Thursday in their monthly report that a recovery in oil demand will be focused on the second half of the year as the impact of the pandemic lingers as a headwind for the group and its allies in supporting the market.
  • Oil hovered near $70 a barrel on Friday, supported by production cuts by major oil producers and optimism about a demand recovery in the second half of the year.
  • Brent had a weekly growth of 1.1% (see Table 1).


Metals

  • Gold appreciated by 1.29%, while Silver also grew by 2.63%W-o-W (see Table 1).


Agriculture

  • Cocoa prices declined by -0.12% this week.
  • Corn prices inched up by 0.14% W-o-W while Sugar declined by -1.65% (see Table 1).

 

Table 1Weekly Change in Commodity Prices

Commodity

12-Mar-21

05-Mar-21

31-Dec-20

Weekly Chg

YTD Chg

Brent

69.59

68.83

51.8

1.10%

34.34%

Gold

1719.1

1697.21

1898.67

1.29%

-9.46%

Silver

25.78

25.12

26.4011

2.63%

-2.35%

Cocoa

2573

2576

2597

-0.12%

-0.92%

Corn

540

539.25

484

0.14%

11.57%

Sugar

16.13

16.4

15.28

-1.65%

5.56%

Source: Bloomberg, Proshare Research

*Data for 12th Mar 2021 is as of 5:56 pm (Nigerian Time)

 

Outlook

  • In the coming week, oil prices are expected to rise after OPEC forecast a stronger oil demand recovery this year, weighted to the second half. Draws on U.S. gasoline stocks likely to support prices too.
  • Gold prices are expected to be bearish in the coming week, as bond yields continue their upward trend and the strengthening U.S. dollar expected to weigh on the yellow metal.
  • Cocoa surplus and pandemic conditions to depress prices in the coming week.
  • Sugar prices are expected to dip next week due to the lack of demand and oversupply.
  • Corn prices are expected to rise in the coming week as China is scouring the globe for feed grains as it rebuilds its hog herd which was ravaged by African swine fever.



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Fixed Income and Money Market 

  

Money Market

Funding rates for the week traded higher this week and continued for most of the trading session this week.

 

At the close of the trading session this week, Open Buyback (OBB) closed at 13.33% while Overnight (O/N) rates closed at 14.17% indicating a Week-on-Week (W-o-W) reduction of -13.05% for OBB and -13.23% for O/N rates  (see Table 2 below).


Table 2Money Market Rate

Money Market Rate

 

05-Mar-21

12-Mar-21

% Change

OBB

15.33

13.33

-13.05%

O/N

16.33

14.17

-13.23%

Source: FMDQ, Proshare Research

Rates are expected to continue to trend lower with the absence of any funding obligations.

 

Treasury Bills Market

Activity picked up for the Nigerian Treasury Bills (NTB) market as there was an uptick in the yields auctioned out by the CBN especially at the long end of the curve.

 

At the close of the week, there was a marginal uptick in average benchmark yields for the T-bills it increased W-o-W by +0.85% to close at 2.83% and OMO bills also increased slightly by +0.13% to close at 6.79%. Yield for CBN’s Special bills also saw an uptick of +0.60% W-o-W  (see Table 3 below).

 

Table 3Weekly Change in Average Benchmark Yields

 

Average Benchmark Yields

05-Mar-21

12-Mar-21

% Change

T. Bills (%)

1.53

2.83

+0.85%

OMO Bills (%)

6.01

6.79

+0.13%

SPEB

3.06

4.91

+0.60%

Source: FMDQ, Proshare Research

 

The Central Bank sold N108.76 billion worth of notes against N88.91 billion offered at its NTB auction. The offer was across all tenors. The 91-day was oversubscribed by +317.01% while the 182 and 364-day notes were oversubscribed by +278.79% and +77.93% respectively. Save for the long tenor paper, rates were nearly unchanged on tenors.  The 91-day, 182-day & 364-day notes were allotted at 2.00%, 3.50%, & 6.50% respectively. 

 

 

Primary Market Auction Result - NTB - March 10, 2021

Tenor

Amount Offered (N'bn)

Total Subscription (N'bn)

Amount Allotted (N'bn)

Rate (%)

Previous Rate (%)

91 days

4.41

18.39

4.74

2

2

182 days

14

53.03

23.45

3.5

3.5

364 days

70.5

125.44

80.57

6.5

5.5

 

MTN Nigeria Communications Plc announced the Series III and IV Commercial Paper Issuance, under its N200 billion Commercial Paper ("CP") Issuance Programme. The proceeds from the Offer will be applied towards MTN Nigeria's working capital and general corporate purposes as stated by the Company. The Offer is scheduled to close on Wednesday, March 19, 2021.

 

Participation in the NTB market is expected to pick up as we continue to see an uptick in rates.

 

FGN Bond Market

The overall trading session of the FGN Bond market for the week was mixed, although there was an uptick in activity at the beginning of the week which waned off after the NTB auction.

 

Overall average benchmark yields closed at 5.% for the week which increased W-o-W by +8.69% with mild sell interest seen across the mid and long-dated instrument.


Average Benchmark Yields

05-Mar-21

12-Mar-21

% Change

Short Tenor (%)

2.67

3.62

+0.36

Mid Tenor (%)

7.14

6.91

-0.03

Long Tenor (%)

10.61

10.38

-0.02

Source: FMDQ, Proshare Research

 

In the week, FMDQ recently approved the Listing of the Fidelity Bank PLC Series 1 N41.21 billion Fixed Rate Subordinated Unsecured Bond under its N100.00 billion Bond Issuance Programme to its Platform. 

 

FMDQ also has granted the approval for the Listing of the TSL SPV PLC N12.00 billion Series 1 Guaranteed Fixed Rate Infrastructure Bond under its N50.00 billion Bond Issuance Programme on the Exchange's Platform. 

 

As stated last week, we expect activity to pick up across the board as investors await March bonds and MPC meetings.



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FGN Eurobond Market

The FGN Eurobond market started the week on a bearish note which was supported by the huge sell-off of the US 10 treasuries, however, at the close of the week, the bulls returned to the market.

 

Average benchmark yields rose slightly by +0.52% to close at 6.02% at the end of the week.

 

We expect the market to continue to react to the news both on the domestic level and international level especially to movement in crude oil prices.

 

Foreign Exchange Market

The Naira appreciated W-o-W by +0.24% against the USD at the I & E FX window, for the BDC market it remained unchanged against the dollar, against the British Pound it depreciated W-o-W by -0.30% while against the Euro it appreciated by +0.34%.

 

The Naira closed the week at $/N410 at the I&E FX window, at the NAFEX (spot market) it closed at $/N408.32, and at the BDC market, it closed at $/N480, £/N674, and Euros /N578. 



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Nigerian Capital Market

  • The Nigerian bourse closed the week negative as Investor Sentiment on the equities market was mixed, with a decline of -1.74%. The Nigerian Stock Exchange shed N357.41bn in Market capitalization W-o-W while YTD return and market capitalization currently stands at +43.98% and N20.22trn.
  • The volume of stocks traded on the exchange this week declined by -48.87% while the values of shares traded also decreased by -72.30%A total turnover of 1.62bn shares worth N20.60bn in 21,036 deals was traded this week by investors on the floor of the Exchange.
  • Performance across sectors was mixed this week as the NSE Insurance Index was the highest gainer for the week with a gain of +2.84% while NSE Banking was the highest loser with -5.75%. NSE Consumer Goods and NSE Oil and Gas advanced by +2.18% and +0.59% respectively. NSE Ind and NSE-30 dipped this week by -0.11% and -2.20% respectively.

 

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Chart 1: Movement of NSEASI Index Points 05 Mar.2021- 12 Mar.2021

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Source: NSE, Proshare Research

 

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NASD OTC

 

The NASD OTC Security Index (NSI) and Market Capitalization closed the trading week with a positive movement in Market capitalization and NSI. The NSI and Market capitalization closed the week at 700.78 points and N502.82bn with a growth of +0.50% and +0.50% respectively.

 

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Dangote and Toni Index 

 

Dangote Index closed the week positive with 116.73 basis points from 116.29 basis points recorded the previous week, a growth of +0.38%. DANGSUGAR recorded a growth in share price by +8.79%, NASCON declined by -2.78% while DANGCEM closed flat WoW. NASCON recorded the highest decline W-o-W.

 

Table 2: Dangote Index W-o-W Change


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In addition, the Toni Index closed negative with 87.96 basis points from 96.17 basis points recorded the previous week, a W-o-W decline of -8.53%UBA and UBCAP closed the week negative with -10.06% and -16.08% respectively, TRANSCORP  closed the week positive with +2.47% while TRANSCOHOT and AFRIPRUD closed flat WoW.

 

Table 6: Toni Index W-o-W Change


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Outlook

 

As stated last week, the bearish sentiment and breadth on the market this week and a likelihood of yields improving in the fixed income market we expect the current trend to continue in the coming week.

 

Also, we expect astute investors to take positions in dividend-paying stocks as companies release their full-year 2020 corporate earnings.



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Latest Reports This Past Week

1.     NBS Publishes COVID-19 Impact Monitoring Survey Report for Nov-Dec 2020

2.     FAAC Disburses N2.49trn to FG and N2.30trn to States in Year 2020 - NBS

3.     FAAC Disburses N2.49trn to FG and N2.30trn to States in Year 2020 - NBS

4.     FAAC Disburses N601.11bn in December 2020 - NBS

5.     FAAC Disburses N604.00bn in November 2020 - NBS

6.     Total Value of Capital Importation into Nigeria Stood at US$1,069.68m in Q4 2020 - NBS

7.     N295.72bn Generated as Company Income Tax in Q4 2020 - NBS

8.     N295.72bn Generated as Company Income Tax in Q4 2020 - NBS

9.     N454.69bn Generated as Value Added Tax in Q4 2020 - NBS


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