What To Expect From The Markets This Week - 240521

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Saturday, May 22, 2021 08:40 AM / Proshare Content / Header Image Credit: EcoGraphics


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Nigeria: Economic Dashboard @ 210521 

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Editor's Note

Source: Proshare Research - May 22, 2021

Nigeria Economy

  • To give an account of unremitted funds to the Consolidated Revenue Fund, the Senate Committee on Finance sent invites to over 60-government owned firms to start appearing before it. Prominent amongst the invited government-owned firms include the Central Bank of Nigeria, the Nigeria National Petroleum Corporation, the Nigeria Customs Service, and the Nigerian Maritime and Safety Administration Agency. The Chairman of the Senate panel, Solomon Adeola, noted that it was important for the government to raise money to fund the budget. Furthermore, he emphasized that the full-scale investigation hearing would also enable the National Assembly to identify various leakages of government revenue that had been leading to budget deficit yearly.
  • In addressing the failure of MDAs to remit proper funds to Consolidated Revenue Funds, the Fiscal Responsibility Commission reported that ministries, departments, and agencies of the Federal Government are withholding about N1.2trn. According to the Commission, about 32 listed MDAs are yet to present their audit reports to it since 2007 when it was established. Some of the affected MDAs include the Administrative Staff College of Nigeria, Bank of Agriculture, Bank of Industry, Cement Technology Institute of Nigeria, Centre for Black African Arts and Civilization, Chad Basin National Park, Federal Radio Corporation of Nigeria, etc.
  • Nigeria's inflation declined to 18.12% in April 2021 from 18.17% in March 2021.  Also, food inflation declined from 22.95% in April 2021 to 22.72% in March 2021. The rise in the food index was attributed to the increases in prices of coffee, tea and cocoa, bread and cereals, soft drinks, milk, cheese and egg, vegetable, meat, oil and fats, fish and potatoes, yam, and other tubers. Furthermore, core inflation which excludes the prices of volatile agricultural produce stood at 12.74% in April 021 from 12.67% recorded in March 2021. The highest increases were recorded in prices of pharmaceutical products, vehicle spare parts, hairdressing salons, and personal grooming establishments, garments, furniture and furnishing, medical services, shoes, and other wears, motor cars, major household goods, and fuel and lubricants for personal transport equipment.
  • The House of Representatives at the plenary on Wednesday resolved to investigate the alleged abandonment of the Eastern Rail Line, the Port Harcourt-Maiduguri section after the Federal Government awarded the reconstruction contract for N72.34bn. It was noted that the panel would also confirm the status of the entire contracts awarded for the 1443km Eastern Railway Line for approximately N72.34bn to Messrs Esser Contracting and Industry Company (Turkey), CGGC Global Projects Nigeria Limited, and Lingo Nigeria Limited (in association with Strasky Husty and Partners Ltd of Czech Republic).


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Global Economy

  • The European Parliament voted in freezing ratification of new investment pact with China 599 votes in favour, 30 votes against, and 58 abstentions. The freezing of the ratification comes on the backdrop of the sanctions imposed by Beijing in March on 10 EU politicians, as well as think tanks and diplomatic bodies, in response to Western sanctions against Chinese officials accused of the mass detentions of Muslim Uyghurs in Northwestern China.
  • According to the Office for National Statistics (ONS), retail sales rose by 9.2% in April, as clothes sales rose significantly by almost 70% compared with March. Additionally, overall sales were more than 10% higher than pre-pandemic levels, despite the dip in online sales.
  • The UK is set to offer Australia a trade deal under which both countries would phase out import taxes over 15 years.  Both sides are seeking to expand the value of their trade put at £20.1bn. Presently, metals, wine, and machines form the biggest goods exports from Australia to the UK, while Australia's main UK imports are cars, medicines, and alcoholic drinks. 


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Commodities Market

Weekly Review and Outlook

Energy

Domestic

  • On Tuesday, the Minister of State for Petroleum, Timipre Sylva said subsidy on petrol will soon be withdrawn and the passage of the Petroleum Industry Bill will not go beyond June.
  • On Wednesday, the Nigeria Governors Forum okay full deregulation of petrol (with the fuel selling between N380 and N408.5 per litre), wants the three refineries privatised after rehabilitation, and recommended the purchase of 113 buses to cushion the likely effects of the price increase.
  • Data from the Nigerian Oil Spill Monitor and Response Agency (NOSDRA) using a satellite-powered tracker showed that out of the 3363.03 barrels of oil spilled recorded from December 2020 through April 2021, 3140.10 barrels, representing a staggering 93.4 per cent, were from oil theft. 

 

Foreign

  • Oil prices were mixed in an upper tight range on Monday after the recovery of a major U.S. pipeline network eased concerns oversupply, though fresh restrictions in Asia amid surging COVID-19 cases weighed on sentiment.
  • Data from Russia on Monday showed the country is in a mad run to outrun oil demand peak. Russia is one of the three biggest oil exporters in the world, alongside Saudi Arabia and the United States. It has enough oil to keep producing at current rates at least until 2080, with enough gas reserves to last for another 103 years.
  • On Tuesday, the International Energy Agency (IEA) asked investors not to fund new oil, gas, and coal supply projects if the world wants to reach net-zero emissions by mid-century.
  • According to data from China's National Bureau of Statistics, China's throughput increased by 7.5 percent annually in April 2021, signaling a sustained recovery in crude processing, although the volumes were lower than the record-highs seen in November 2020.
  • Oil prices nudged up on Friday, recovering from three days of losses as investors braced for the return of Iranian crude supplies after officials said Iran and world powers made progress on talks to revive a 2015 nuclear deal.
  • Brent had a weekly decline of -2.76% (see Table 1).

Metals

  • Earlier in the week, Lagos Commodities and Futures Exchange screened Agvest Limited, a player in the agricultural value chain in Nigeria, for the listing of its N5bn cashew nut contract by diversified financial instruments.
  • The World Platinum Investment Council(WPIC) said on Monday the global platinum market will be more undersupplied this year than it previously thought as economic recovery fuels a surge in demand from industry.
  • Gold appreciated by 1.99% while Silver also gained by 0.44% W-o-W (see Table 1).

 

Agriculture

  • Cocoa prices depreciated by -1.57% this week.
  •  Corn prices climbed by 1.49%W-o-W while Sugar dipped by -1.83% (see Table 1).

 

Table 1Weekly Change in Commodity Prices

Commodity

21-May-21

14-May-21

31-Dec-20

Weekly Chg

YTD Chg

Brent

66.56

68.45

51.8

-2.76%

28.49%

Gold

1875.27

1838.76

1898.67

1.99%

-1.23%

Silver

27.46

27.34

26.4011

0.44%

4.01%

Cocoa

2440

2479

2597

-1.57%

-6.05%

Corn

664.25

654.5

484

1.49%

37.24%

Sugar

16.64

16.95

15.28

-1.83%

8.90%

Source: Bloomberg, Proshare Research

*Data for 21st May 2021 is as of 4:22pm (Nigerian Time)

 

Outlook

  • In the coming week, oil prices are expected to dip marginally as Iranian oil is set to flood the market as the country and world powers make progress in a nuclear deal.
  • Gold prices are expected to be mixed in the coming week, pressured by the dollar and U.S. treasury yields.
  • Cocoa prices to decline next week on weak demand from Europe.
  • Sugar prices are expected to rise next week due to the sugar supply shortage in Brazil.
  • Corn prices are expected to be bullish next week on continued demand from China.


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Fixed Income and Money Market 

Currency Market

It was a bearish market for the Naira both at the official window and BDC window this week.

 

On a W-o-W basis, the Naira remained flat against the dollar and the Euro at the BDC window, however, against the Pound it was bearish.

 

At the I & E FX window, the Naira was depreciated marginally by +0.08% at the end of the week.

 

It depreciated against the British Pound by +0.44%, closing at $/N482, £/N680, and €/N584 at the BDC window.  

 

The Naira closed the week at $/N412.0 at the I&E FX window, at the NAFEX (spot market) it closed at $/N410.71.


 

14-May-21

21-May-21

% Change

I & E FX Window ($/N)

411.67

412

+0.08%

NAFEX ($/N)

410.48

410.71

+0.06%

BDC ($/N)

482

482

0.00%

 









Source: FMDQ, AbokiFX, Proshare Research

 

Money Market

Funding rates declined at the start of the week which was supported by system liquidity.

 

Funding rates fell significantly at the close of the week. Open Buyback (OBB) closed at 16.50% while Overnight (O/N) rates closed at 17.0% indicating a Week-on-Week (W-o-W) decline of -38.62% for OBB and -41.14% for O/N rates.

 

Money Market Rate

 

14-May-21

21-May-21

% Change

OBB

26.88

16.50

-38.62%

O/N

28.88

17.00

-41.14%

Source: FMDQ, Proshare Research


Funding rates are expected to trend in double digits in the coming week.

 

Treasury Bills Market

The Nigerian Treasury Bills market continued its bearish sentiment for most of this week, however, the sentiments improved slightly at the end of the week.

 

At the close of the week, the average benchmark yield for T-bills was rose by +13.68% to close at 5.76% while OMO bills rose by +7.10% W-o-W to close at 8.62%. Yield for CBN’s Special bills rose significantly by +17.80% W-o-W to close at 8.87%.

 

Average Benchmark Yields

14-May-21

21-May-21

% Change

T. Bills (%)

5.07

5.76

+13.68%

OMO Bills (%)

8.62

9.23

+7.10%

SPEB

7.53

8.87

+17.80%

Source: FMDQ, Proshare Research

 

We expect the activity in the treasury bills market to remain subdued next week as system liquidity remains relatively tight.

FMDQ Securities Exchange Limited announced the approval for the quotation of the Nigerian Breweries PLC N1.05 billion Series 12, N0.94 billion Series 13, and N2.67 billion Series 14 Commercial Papers under its N100.00 billion Commercial Paper Issuance Programme on its platform. This brings the total CPs series issued by the issuer, since the renewal of its N100.00 billion CP Programme in 2019, to N156.20 billion, with a total of N14.76 billion currently active.

 

Also, FMDQ Exchange approved the Quotation of the N0.96 billion Series 35 Mixta Real Estate PLC Commercial Paper under its N20.00 billion CP Issuance Programme on its platform. The proceeds from the CP quotation will be used to finance Mixta Real Estate PLC's short-term funding requirements.

 

FGN Bond Market

The Bond market started the week on a relatively quiet note as attention was drawn to the Bond auction.

 

At the close of the week, the market was bearish with selling interest seen majorly at the short end of the curve.

 

The overall average benchmark yields closed at 9.52% for the week which increased W-o-W by +4.61%.

 

Average Benchmark Yields

14-May-21

21-May-21

% Change

Short Tenor (%)

6.37

6.98

+9.53%

Mid Tenor (%)

11.22

11.27

+0.42%

Long Tenor (%)

13.51

13.62

+0.80%

Source: FMDQ, Proshare Research 

 

The DMO sold N195.24 billion worth of bonds after offering N150.00 billion at its auction today. The bond was oversubscribed for the 15-year and 30-year notes. The 10-year, 15-year & 30-year bonds were allotted at 13.10%, 14.00%, & 14.20% respectively. 

 

FGN Bonds Auction Result - May 19, 2021

Tenor

Marginal Rate (%)

Amount Offer (N'bn)

Total Subscription (N'bn)

Amount Allotted (N'bn) 

Previous Rate (%)

10 Year

13.1

50

37.24

20.14

12.25

15 Year

14

50

57.35

41.15

13.34

30 Year

14.2

50

187.38

133.95

13.85

Source: DMO, Proshare Research 

 

FGN Eurobond Market

The Eurobond market traded on a relatively weak note this week with sell-off seen across all SSA papers following the rise in US treasury yields coupled with a decline in crude oil prices.


The average benchmark yield closed at 6.17% at the end of the week increasing marginally W-o-W by +0.82%.



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Nigerian Capital Market

  • Nigeria's all share index fell further this week as investors sustained their profit taking on the exchange. The Nigerian bourse closed the week negative with a decline of -2.93%. The Nigerian Stock Exchange lost N603.48bn thus, year-to-date return deteriorated to -4.83%, while the market capitalisation settled at N19.98 trillion.
  • The volume and value of stocks traded on the exchange this week declined by -20.61% and -33.09% respectively.
  • Performance across sectors tracked was broadly negative this week as the NSE Oil and Gas was the highest gainer for the week with +7.39% while NSE-IND recorded the highest decline with -3.34%. NSE Banking, NSE-30, NSE Insurance and NSE Consumer Goods closed the week negative with -1.53%, -1.48%, -0.74% and -0.03% respectively.


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Chart 1: Movement of NSEASI Index Points 14May. 2021 - 21 May. 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 773.39 points and N549.74bn with an uptick of +0.65% and +0.65% respectively.

 

 

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Dangote and Toni Index  

Dangote Index closed the week negative with 111.56 basis points from 114.31 basis points recorded the previous week, representing a decline of -2.41%.

 

NASCON closed flat, DANGCEM  and DANGSUGAR decline by -2.33% and -4.18% WoW resprectively. DANGSUGAR recorded the highest gain W-o-W.

 

 

Table 2: Dangote Index W-o-W Change

 

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Furthermore, the Toni Index closed negative with 91.97 basis points from 92.30 basis points recorded the previous week, a W-o-W decline of -0.36%

 

AFRIPRUD, UBA  and UBCAP all closed the week negative with -7.69%, -0.68% and -2.72% whileTRANSCORP closed flat W-o-W and TRANSCOHOT closed positive with +9.85%.


 

Table 3: Toni Index W-o-W Change

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Outlook

 

In the coming week, we expect a likelihood of choppy trading sessions during the week as investors In the coming week, we expect some bargain hunting as the profit taking run creates attractive entry points. However, press releases from listed companies and macroeconomic developments is likely to impact investors' decisions.

 

In addition, we expect investors to monitor the movement of yields in the fixed income market.



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