Weekly Economic and Financial Commentary – WE 14th June, 2019

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Saturday, June 15, 2019  / 08:30AM / By ARM Research 

 

Global Economy

During the week, OPEC released the monthly oil market report for June which showed a downward revision to its global oil demand growth forecast for 2019 to 1.14mbpd – 70,000 bpd lower than previous forecast. This is on the back of sluggish oil demand from the OECD countries during Q1 19, amid intensifying Sino-US trade tensions. On another note, U.K recorded its weakest monthly economic growth this year, printing at 1.3% YoY (previously 1.9%) buoyed by a dramatic fall in car manufacturing and weakness in the construction sector. Also, US inflation rate for the month of May moderated to 1.8% (April: 2%), following decline in energy prices. This prints below the Fed’s 2% target which further reinforces the case for a rate cut. 

 

Domestic Economy 

The National Bureau of Statistics recently released Pension Asset and Membership data for Q1 2019 which showed 5% QoQ increase in Pension fund asset (PFA) in Q1 2019 to N9.03 trillion. Bulk of the assets remained invested in FGN securities (72% of PFA), although slightly lower compared to Q4 18 (73% of PFA), while there was increased exposure to money market securities (9.7% vs Q4 18: 8.2%). Elsewhere, the CBN’s monthly economic report for April showed the apex bank’s intervention in the FX market dipped slightly by 13.2% MoM to $3.3 billion in April. Also, BDC sales and swaps transaction dipped by 2.1% MoM and 45.8% MoM to $1.2 billion and $570 million, respectively, while interbank FX sales surged by 129% MoM to $310 million. In all, the naira remained stable over the period, within a range of N359.0/$ to N360.5/$, while official rate weakened slightly by 0.01% to N306.96/$

 

Equities

The Nigerian Bourse closed negative for the second consecutive week, with the NSE ASI shedding 1.27% WoW to close at 30,046.70 points and market capitalization dropping by N385.43 billion. The bearish sentiment was spurred by losses recorded in Cement (-2.67%), Food (-1.85%) and Brewers (-0.78%) sectors offsetting the gains in Banking (+0.01), Personal care (+0.78%), Insurance (+0.43%), Oil & Gas (+0.48%) and Real Estate (+0.03%) segments. A closer look at the market  performance reveals selloff across names like DANGCEM: -2.65%, NESTLE: -1.38%, INTBREW: -7.25%, UBA: -1.60%, ZENITH: -1.72%, DANGSUGA: -7.83%, UACN: -1.59% and PRESCO: -5.17%. 

 

Fixed Income

Average fixed income yields dipped 45 bps WoW to 13.34%, following contraction in yields at the short end of the market which offset the expansion at the long-end. In the NTB market, average yields dropped 99 bps WoW to 12.3%, following increased demand across the 91-day (-159 bps), 182-day (-100 bps) and 364-day (-37 bps) bills. Meanwhile, at the NTB auction held during the week, N129 billion worth of bills were sold (subscription: N265 million), while all stop rates were left unchanged save for the 1-year bill which increased by 14 bps to 12.34%, following increased range of bids put forward by investors. On the other hand, average bond yields expanded 10bps to 14.37%, on the back of a selloff of the JUN-19 (+130 bps) bond which outweighed interest in the FEB-20 (-78 bps) bond.   

 

Take-Away For The Week

Trend in Global Crude Oil Market 

This week, we feature the trend in global crude oil market balance (000’bpd) as well as average monthly crude oil prices ($/bbl.) over the year. The chart shows the market was in a deficit earlier in the year, before reversing to a market surplus. Pointedly an uptick in supply coupled with the slowdown in demand drove the surplus. Thus, amid intensified concerns of global economy growth, crude oil prices went south.



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Research 234 (1) 2701653  research@armsecurities.com.ng

 

Nigeria: Economic Dashboard @ 070619  

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