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Saturday,
December 14, 2019 08:00 AM / Proshare Content
Nigeria: Economic Dashboard @ 071219
Editor's Pick
Source: Cordros Weekly Economic and Market Report - December 13, 2019
Global economy
This
week, the US labour department announced that the country's consumer price
index (CPI) rose to a 12-month high in November, as headline inflation rose by
30bps to 2.1% y/y, largely on account of higher energy and healthcare prices.
From a month ago, inflation increased by 0.3% (October: +0.4% m/m), following a
1.1% m/m expansion in fuel prices. Excluding volatile items (food and energy),
inflation was flat. Looking ahead, we see further legroom for inflation to run
ahead given stronger crude oil prices, which could further put pressure on
energy costs.
Elsewhere,
in its final meeting of the year, the Federal Open Market Committee (FOMC) held
policy parameters unchanged after previously cutting the Fed funds rate on
three different occasions in 2019. Specifically, the rate was left at a range
of 1.5% to 1.75%, with the committee expressing satisfaction with the current
state of the economic landscape. More so, the faster pace of consumer prices in
November further justified the committee's action. Our key takeaway from the
policy statement is that the Fed funds rate, will likely remain unchanged for
an extended period of time. The foregoing is supported by the "dot plot" which
indicated a low probability of a rate cut in 2020. Irrespective, we don't believe
this is the end of the easing cycle in the US, as a further escalation of a
trade dispute between the US and China could force a policy re-think, given its
negative impact on the external sector, and by extension, economic growth.
Global markets
There
were positive returns recorded in several markets across the globe, as
U.S.-China trade hopes and an election win for Britain's 'Brexit'-backing
Conservative Party, cleared two of the clouds on the global investment horizon.
Consequently, US (DJIA: +0.4%; S&P: +0.7%), Euro Area (Euro Stoxx: +2.0%;
FTSE 100: +2.4%) and Asian (Nikkei 225: +2.9%; CSI 300: +1.7%) indices all
looked set to close in the green. Developing world (MSCI EM: +2.1%; MSCI FM:
+0.8%) stocks topped an over seven-month peak as positive headlines regarding
the two aforementioned risk factors saw widespread position-taking in risk
assets.
Nigeria
Economy
According
to the business confidence survey by CBN, business sentiments in November
strengthened for the second consecutive month. Specifically, the overall
business outlook on the macroeconomy widened by +1.7 points to 29.0 index
points - the highest since May 2019. Similarly, strong momentum was recorded
across all sectors, with the Construction (+2.9 points) and Services (+2.0
points) sectors leading the pack, closely followed by the Trade (+1.9 points)
and the Industrial (+1.4 points) sectors. In our view, the improved reading
reflects the lowered cost borrowing and a fairly stable macroeconomic climate.
Looking ahead, we expect business confidence to remain strengthened, induced by
festive spending and the CBN's pursuit of improved credit extension to the
private sector.
According
to telecommunications data released by the Nigeria Communications Commission
(NCC), the total number of telephone subscribers for October 2019 grew by 9.2%
y/y, while the number of active lines & internet subscribers witnessed a
double-digit expansion of 15.0% y/y over the same period. In our view, the
strong performance in the telecommunication sector was as a result of continued
competition in the industry, wherein sector players offered customers more data
at a lower cost - especially Globalcom and Airtel (c.55.2% market share).
Meanwhile, we highlight that teledensity - number of telephone connections for
every hundred individuals - dipped by 19.94% y/y, due to the rebasing of the
population number used in the calculation from 140 million to 190 million by
the NCC. On the strength of this, we still expect the telco sub-sector (c.33.0%
of service GDP) to continue to lead growth in the Services sector, thus,
boosting non-oil GDP. We forecast GDP growth of 2.36% y/y in Q4-19.
Capital
markets
Equities
Profit-taking
activities intensified in the equities market as the selloffs from the previous
week persisted. With losses recorded on three of five trading sessions of the
week, the All-share index shed 1.2% to settle the YTD loss at -15.6%. Analysing
the performance by sectors, similar to last week, significant losses recorded
in the Banking and Industrial Goods sectors weighed on the market performance,
as both indices declined by -1.2% apiece. The Consumer Goods index followed
suit, declining by 0.5%. On the other hand, trading in the Insurance and Oil
and Gas indices was sideways as both indices closed flat.
In
our view, given the risk-off sentiment dominating the domestic market, we
expect the market to shed points in the coming week, except we see a
policy-driven catalyst. Nevertheless, valuations remain attractive, hence we
expect pockets of gains over the final weeks of the year as fund and portfolio
managers realign portfolios prior to the start of 2020.
Money
market and fixed income
Money market
The
overnight (OVN) rate undulated during the week, before settling lower by
0.28ppts at 2.8%. On the first trading day, the rate settled 0.2ppts lower at
2.9% as system liquidity thinned out. Similarly, by the second trading day, the
rate had advanced by 0.1ppts, before then increasing on the subsequent trading
day following maturities worth NGN141.36 billion filtering into the system.
However, on the penultimate trading of the week, the rate pared marginally by
0.1ppts to 2.9%.
In
the coming week, T-bills maturities worth a combined NGN73.30 billion - OMO
(NGN51.30 billion) and PMA maturities (NGN22.00 billion) -, and Federal
Government Savings bonds coupons (NGN13.33 million) - from the 11.418% JUN-2021
and 12.418% JUN-2022 instruments - are expected during the week. In combination
with the already substantial system liquidity level, we expect the rate to
remain moderate during the coming week.
Treasury bills
Trading
in the Treasury bills market remained bullish this week as the average yield
across instruments pared by 99bps to 10.8%. As with the prior week, the NTB
market, where local corporates and individuals trade, remained the most active.
Consequently, the average yield on NTB in the secondary market declined by 1.1%
to 6.5%, while in the OMO space the average yield pared by 0.9% to 13.2%. Also,
there was a PMA auction held during the week, for instruments worth NGN45.00
billion - 91DAY (Stop rate: 5.0000%; Previous stop rate: 6.495%; Bid-to-offer:
10.77x), 182DAY (Stop rate: 6.1900%; Previous stop rate: 7.2300%; Bid-to-offer:
4.63x), 364DAY (Stop rate: 6.8800%; Previous stop rate: 8.3700%; Bid-to-offer:
6.41x).
As
expected substantial OMO maturities have continued to pressure secondary market
yields. We expect this trend to persist till the end of Q1-20 over which period
a further NGN5.11 trillion worth of instruments will mature. Overall, we expect
volumes in the market to pare and market participants to continue to take
positions in Treasury bonds as has been witnessed over the past few weeks.
Bond
Trading in the Treasury bonds secondary market was tepid as the average yield pared marginally by 80bps to settle at 10.8%. There were yield declines recorded across all instruments in the market, with the largest decline recorded on the 15.54% FEB-2020 instrument (-175bps to 5.2%). Also, the DMO will hold the final PMA Treasury bonds auction for 2019 during the week, on the 18th of December, when three instruments will be offered to investors through re-openings - 12.75% FGN APR 2023, 14.55% FGN APR 2029, and 14.80% FGN APR 2049.
For
the PMA next week, we expect strong participation at the auction, as investors
seek to lock in high yields, given the expectation of a declining yield
environment. In our view, the restrictions on trading in the Treasury bills
will continue to drive volumes in the Treasury bonds market. Consequently, we
expect the average yield in the market to settle in the single-digit territory
by 2019YE.
Foreign exchange
Amidst
continued sell-offs by offshore investors, Nigeria's FX reserve dipped by
USD27.86 million WTD (11th Dec 2019) to USD39.38 billion. Meanwhile, the CBN
sustained its weekly FX interventions, 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 weakened by 0.1% WTD to NGN363.49 /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 44.8% WTD to
USD1.34 billion, with trades consummated within the NGN357.00 - 363.80/USD
band. In the Forwards market, the naira rate was weaker across all contracts
week-on-week - 1-month (-0.1% to NGN366.30/USD), 3-month (-0.1% to
NGN371.80/USD), 6-month (-0.2% to NGN380.25/USD) and 1-year (-1.2% to
NGN378.65/USD).
Despite the rate of decline in FX reserves, which has heightened fears regarding the possibility of a currency devaluation, our model suggests that the CBN has enough ammunition to sustain its naira defense over 2019 and through H1-20.
Sunday,
December 15, 2019
The National Bureau
of Statistics will
on this day release its CPI and Inflation Report November
2019, Automotive Gas Oil (Diesel) Price Watch November 2019, Liquefied
Petroleum Gas (Cooking Gas) Price Watch Nov 2019, SELECTED FOOD PRICES Nov 2019
and the Transport Fare Watch (Nov 2019).
Monday,
December 16, 2019
The Nation
Builders achievers’ awards will on this day hold at
the NAF Conference Centre and Suites, 496
Ahmadu Bello Way Abuja.
Tuesday, December 17, 2019
The Interlinked Technologies Plc will on this day hold its Annual General Meeting
at the NECA House, Plot A2, Hakeem Balogun Street, Ikeja, Lagos while Forte Oil PLC will on this day hold its EGM at the Bespoke Event Centre,
Lekki -Ajah Expressway, Lagos.
The Universal Insurance Plc will on this day hold its Annual General Meeting
at NECA House, Plot A2, Hakeem Balogun Street, Ikeja, Lagos while The National Bureau of
Statistics will on this day release its Premium motor spirit (petrol) price watch Nov 2019
The WORKPLAN by RiseNetworks will on this day hold with the theme The Future of Work and the 4th Industrial Revolution powered by Local Content at Pistis Centre, 1, Ikorodu Road Maryland, Lagos, Nigeria
Wednesday, December 18, 2019
The National Bureau of Statistics will on this day release the AUTOMOTIVE GAS OIL ( DIESEL) PRICE WATCH Nov 2019, Liquefied Petroleum Gas (Cooking Gas) Price Watch Nov 2019 & NATIONAL HOUSEHOLD KEROSENE PICE WATCH November 2019
The Nigerian Hajj and Umrah
Exhibition (NHAUE) will begin on
this day at Sheraton Abuja Hotel.
Thursday, December 19, 2019
The National Bureau of Statistics will on this day release the Foreign trade in goods statistics (Q3 2019)
Friday, December 20, 2019
African Alliance Insurance Plc (2017 & 2018 AFS) will on this day hold its Annual General Meeting at the
Ibom Resort, Uyo, Akwa Ibom State while The National Bureau of
Statistics will
on this day release the Q3 2019, terms of trade report.
Check out our Events Calendar for event details and follow us on Web, TV, APP and Social Media for updates as the week unfolds. Yours to Serve!
Contact for Details:
For further information, enquiry or submission of information, kindly email market@proshareng.com and research@proshareng.com Tel: 0700PROSHARE (070077674273). Call us NOW!
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