What To Expect From The Markets This Week - 240122

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Saturday, January  22, 2022, / 07:20 AM / Proshare Content / Header Image Credit: EcoGraphics


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Nigeria: Economic Dashboard @210122


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Editor's Note

Source: Proshare Research - January 22, 2021

Nigeria Economy

  • The IMF disclosed on Thursday that it proposes a $50bn Resilience and Sustainability Trust (RST) to help low-income and vulnerable middle-income countries build resilience to balance of payments shocks. The RST is expected to be approved by the IMF Executive Board before the upcoming Spring Meetings and become fully operational by year-end. Nigeria as well as other middle-income countries with per capita GNI below $12,000 are eligible for the RST financing.
  • In the latest CPI report released by the National Bureau of Statistics on Monday, Nigeria's Inflation rate fell for the first time in nine months. Headline consumer price index rose by 15.63% y-o-y a 23-basis point increase in inflation rate compared to the 15.40% recorded in the month of November. Meanwhile, headline Inflation FY 2021 settled at 16.98%, while Food CPI in December rose to 17.37% year-on-year making it 16 basis points higher than the 17.21% recorded in November.
  • Lagos State Commissioner for Finance, Dr Rabiu Olowo, at a press briefing in Lagos, announced on Tuesday the introduction of a consolidated point-of-departure N800 daily levy on the informal transport sector, effective from February 1st, 2022. The move which is intended to harmonize existing taxes payable by transporters to the government would see transporters pay 288,000 annually as taxes. According to the NURTW, the N800 harmonised tax excludes the N3,000 daily dues paid by the transporters to the union.
  • The Lagos State Internal Revenue Service has given firms based in the state till January 31, 2022, to file their annual tax returns or risk penalties for late payment. In a statement released on Tuesday by LIRS, the LIRS advised businesses and employers of labour on the need to avoid sanctions due to late payment.
  • According to capital importation reports by the NBS, Nine-month Foreign Direct Investment in Nigeria dropped by 48.9% in 2021 compared to 2019 levels- before the pandemic set in. In the first nine months of 2019, FDI contributed a total of $666.33m to aggregate capital inflow FDI fell to $340.52m, representing a decrease of 48.9 % when compared to the same period in 2021.


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Global Economy

  • Chinese officials have downplayed concerns about potential capital outflows as Beijing embarks on monetary easing to stimulate economic growth. According to the officials, China would cope well with the changes in the global financial condition through its export-driven growth in foreign exchange deposits and its attractive yuan-denominated assets. The limited pressure on onshore entities to repay foreign debt, would also reduce the spill-over effects of the U.S. Federal Reserve's monetary tightening. China's central bank has had to cut interest rates in recent weeks to support the economy which appears to be losing momentum growing by only 4% in Q4 2021.
  • Economists have predicted a swifter fall in House prices. ANZ forecasts show a decline of 7% in the price of homes, down from its earlier forecast of a 3% fall. According to the forecast, Inflation pressures would continue to intensify,  necessitating  higher mortgage rates and a weaker outlook for house prices. Annual house price increases slowed by 2.3 % in December.
  • According to data from the Office for National Statistics, Britain's consumer price index (CPI) rose to 5.4 % in the final month of the year, its highest in almost 30 years, analysts had forecast that the annual CPI rate would edge up to 5.2 % in December from 5.1 % in November. Meanwhile, on a monthly basis, UK consumer inflation increased by 0.5 % in December 2021.
  • Data from the Office for National Statistics revealed the number of UK payrolled workers jumped by a record 184,000 month-on-month, or 0.6 %, in December to 29.5million. The data shows that the jobs market is thriving, with employee numbers rising to record levels, and redundancy notifications at their lowest levels since 2006 in December, Chancellor Rishi Sunak said. The figures also showed that in the three months to November the unemployment rate nearly eased back to where it was pre-Covid, to 4.1 % from 4.2 % in the previous quarter. 


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Review and Outlook

Inflation data for the month of December suggests that inflation reversed the downward trend it sustained for eight straight months in 2021, coming in at 15.63% and bringing the year's average to 16.98%. This exceeds the forecast of many analysts and that of the IMF which had projected an annual inflation average of 16.5%. The price growth was attributed to the surge in demand during the festive period. When it meets next week, the MPC committee would be looking closely at the inflation trend vis a vis fears of capital reversal associated with Monetary policy normalisation in the US and other advanced economies.  Meanwhile, the PMI data for Japan and the EU would come in focus in the coming week, likewise US GDP and PCI figures would be issued next week.

 

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Commodities Market

Weekly Review and Outlook

Energy

Domestic

  • According to the latest OPEC Monthly Oil Market Report (MOMR), Nigeria's oil production in December 2021, based on direct communication, fell to 1.197 million barrels per day (mb/d) from 1.275 mb/d recorded in November. Based on secondary sources, the country's output fell to 1.338 mb/d from 1.381 mb/d in November. The country's rig counts also fell to 6 units in December from 7 units in November to average 7 units in 2021, a sign future output may continue to underperform.
  • AP LPG terminal, a subsidiary of Ardova PLC, on Wednesday, launched the official commencement of a 20,000 metric tonne LPG storage terminal construction at Ijora, Lagos.
  • The National Bureau of Statistics (NBS) latest Petroleum Price Watch revealed that the average price paid for Premium Motor Spirit (petrol) increased by 0.04% Year-on-Year to N165.77 in December 2021 while the average price paid per litre of Automotive Gas Oil (Diesel) increased by 28.97% to N289.37 per litre in December 2021. However, a few independent surveys revealed that Diesel is sold at a much higher N350 per litre in most stations across the country.
  • According to a report by the Port Harcourt Refining Company (PHRC), which is currently under rehabilitation, the company would supply 11 million litres of petrol, translating to 3.96 billion litres annually, to the Nigerian market upon completion.
  • The Nigeria Governors' Forum (NGF) on Thursday resolved to initiate talks with the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) on the proposed removal of subsidy on petrol. The National Economic Council (NEC) also disclosed that a decision on the removal of petrol subsidy will be made in June 2022 when the provision for its payment in the 2022 budget elapse.

 


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Foreign

  • Oil prices rose on Monday, with Brent futures touching their highest in more than three years, as investors bet supply will remain tight amid restrained output by major producers with global demand unperturbed by the Omicron coronavirus variant.
  • Saudi Energy Minister, Prince Abdulaziz bin Salman, has said he is always comfortable with crude oil prices and that it was at the US prerogative whether to release supply from its strategic petroleum reserves.
  • China's refinery throughput surged by 4.3% to average 14.07 mb/d in 2021, on robust H1 fuel demand and as refiners ramped up processing to fill a supply gap after a heavy new tax closed loopholes in blending fuel imports, according to China's National Bureau of Statistics.
  • The oil market factored in the possibility of supply disruptions on Tuesday with over $1 increase in oil prices after Yemen's Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition.
  • According to Libya's oil minister, Mohammed Oun, the country's crude oil production has rebounded to 1.2 mb/d after a series of outages. OilX -an advanced oil data analytics- also reported that daily oil production in Kazakhstan has rebounded in the week ending 14 January.
  • Analysts and market observers have noted that the recent oil rally may persist in the next few months due to recovery in demand and limited capacity of OPEC+ to add supply, which may push oil prices to break the $100 per barrel mark.
  • The U.S. President, Joe Biden, has pledged to continue trying to lower oil prices that are running at a seven-year high despite his faltering effort to persuade producing countries to increase output.
  • U.S. crude exports are ramping up, edging close to 3 mb/d on the back of increased demand from Asia and Europe and recovering U.S. crude oil production.
  • Natural gas prices dipped on Wednesday and Thursday following a report that major Chinese liquefied natural gas (LNG) importers are currently offering to resell some LNG cargoes on the spot market, indicating that China has stocked up more than enough gas to see it through the winter and ease concerns about the global gas crunch.
  • Oil prices fell on Friday, after rising to seven-year highs during the week, as investors took profits after a build in U.S. crude and fuel inventories, though overall sentiment remained solid due to concerns over tight supply and geopolitical risks.
  • Brent had a weekly growth of +2.98% (see Table 1).


Metals

Gold appreciated by +0.92% while Silver also appreciated by +6.50% W-o-W (see Table 1).

 

Agriculture

  • Cocoa prices dipped by -2.89% W-o-W.
  • Corn prices appreciated by +3.85% W-o-W while Sugar appreciated by +3.05% (see Table 1).


Table 1Weekly Change in Commodity Prices

Commodity

21-Jan-22

14-Jan-22

31-Dec-21

Weekly Chg

YTD Chg

Brent

87.7

85.16

78.54

2.98%

11.66%

Gold

1834.8

1818

1827.1

0.92%

0.42%

Silver

24.415

22.925

23.27

6.50%

4.92%

Cocoa

2585

2662

2546

-2.89%

1.53%

Corn

613.5

590.75

595.5

3.85%

3.02%

Sugar

18.9

18.34

18.83

3.05%

0.37%

Source: CNBC, Proshare Research

*Data for 21st January 2022 is as of 5:49pm (Nigerian Time)

 

Outlook

  • In the coming week, oil prices are expected to steady as supply chain pressures reduces
  • Gold prices are expected to steady as global economies try to tackle rising inflation.
  • Cocoa prices are expected to appreciate in the coming week as demand still outpaces supply in the global market
  • Sugar prices are expected to appreciate as exports begins to slow down forcing a possible supply to demand gap
  • Corn prices are expected to steady as higher yield could put pressure on prices forcing its surge to slow down.


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Fixed Income and Money Market 


Currency Market 

For most of the trading on the I & E FX Window, the Naira depreciated against the US Dollar. At the close of trading on Friday, the Naira appreciated against the US Dollar against the previous day's session.

On a week-on-week (W-on-W) basis, the Naira closed flat, trading at N416/USD, while it appreciated at the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window by -0.09%.

 

Average Benchmark Yields

 

12-Jan-21

21-Jan-21

% Change

I & E FX Window

416

416

-

NAFEX ($/N)

415.80

415.43

-0.09%

Source: FMDQ, Proshare Research

 

Money Market 

System liquidity remained elevated this week, however, money market rates traded in double digits.

At the close of the trading on Friday, open repo (OPR) and overnight rates (O/N) settled at 15.00% and 15.25% respectively indicating a W-o-W rise of +11.11% and +7.02%.

 

Money Market Rate

 

13-Jan-21

21-Jan-21

% Change

OPR (%)

13.5

15.00

+11.11%

O/N (%)

14.25

15.25

+7.02%

Source: FMDQ, Proshare Research

 

We expect rates to hover around current levels barring any significant outflows from the Apex bank.

 

Treasury Bills Market

The treasury bills market was quiet this week and benchmark yield was mostly unchanged.

At the close of trading on Friday, the market was mixed with buying interest seen at the NT Bills while the OMO Bills saw selling interest. Average benchmark yields for T. Bills fell by -0.13%, yields on OMO bills advanced by +5.61%.

 

Average Benchmark Yields

 

14-Jan-21

21-Jan-21

% Change

T. Bills (%)

4.54

4.53

-0.13%

OMO Bills (%)

5.61

5.67

+5.61%

Source: FMDQ, Proshare Research

We expect activity next week to be weak depending on the market liquidity situation. 


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FGN Bond Market 

The local bond market was mostly quiet this week with few bullish trading sessions in the week.

 

At the close of trading on Friday, the market closed bullish. Overall average benchmark yields closed at 11.79%, with benchmark yield falling by -0.21%.

 

 

Average Benchmark Yields

 

14-Jan-21

21-Jan-21

% Change

Short Tenor

8.24

8.21

-0.42%

Mid Tenor

11.34

11.36

+0.15%

Long Tenor

12.69

12.64

-0.36%

Source: FMDQ, Proshare Research 

 

FGN Eurobond Market 

At the start of trading this week, the market continued in its bearish tone as risk sentiments soured amid rekindled fears of heated inflation and aggressive Federal Reserve policy tightening.


At the close of trading this week, the market was relatively bullish, buoyed by the uptrend in crude oil prices and attractive yield levels. The average benchmark yield fell by 12bps to 7.10%. 



Nigerian Capital Market

  • The Nigerian bourse started the week on a positive note while market sentiment remained mixed, albeit with occasional bargain hunting. The NGXASI closed the week on a positive note with a rise of +3.38%. The Nigerian Exchange gained N809.62bn. However, year-to-date return was negative at +7.59%, while the market capitalization settled at N24.76trillion.
  • Sectoral performance across sectors tracked was mixed, at the close of trading on Friday, NGX-Oil and Gas was the highest gainer for the week with +5.21% while NGX-Insurance recorded the highest decline with -0.27%. NGX-IND, NGX-Mainboard, and NGX MERIGRW closed the week with +4.37%, +3.96%, and +2.99% respectively.
  • Market breadth for the week closed positive with 27 gainers led by NNFM and COURTVILLE as against 9 losers led by REGALINS and SOVERNINS

 

Chart 1: Movement of NSEASI Index Points 14 Jan 2022- 21 Jan. 2022

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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 negative movement in Market capitalization and NSI. The NSI and Market capitalization closed the week at 744.54 points and N630.46bn with decline of -0.73% and -0.73% respectively.

 

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Dangote and Toni Index  

Dangote Index closed the week positive with 148.86 basis points from 141.19 basis points recorded the previous week, representing a rise of +5.43%

DANGCEM  recorded a rise of +5.52% NASCON  was at a flat rate

 

Table 2: Dangote Index W-o-W Change

 

Company

14-Jan-22

21-Jan-22

WoW Chg

DANGCEM

270.00

284.90

5.52%

DANGSUGAR

17.00

17.75

4.41%

NASCON

13.10

13.10

0.00%

Source: NGX, Proshare Research 

 

Furthermore, the Toni Index closed negative with 113.98 basis points from 114.89 basis points recorded the previous week, a W-o-W decline of -0.79%.

UBA and UBCAP and TRANSCORP closed the week negative with -0.61%, -0.45% while AFRIPRUD closed the week positive with  +2.33% respectively. TRANSCOHOT closed flat W-o-W.

 

Table 3: Toni Index W-o-W Change

Company

14-Jan-22

21-Jan-22

WoW Chg

AFRIPRUD

6.45

6.60

2.33%

TRANSCOHOT

5.38

5.38

0.00%

TRANSCORP

1.14

1.08

-5.26%

UBA

8.25

8.20

-0.61%

UBCAP

11.10

11.15

0.45%

Source: NGX, Proshare Research 


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