Saturday, February 15, 2020 / 03:00PM / By ARM
Research /Header Image Credit: ARM Research
China's inflation rose by 5.4% YoY in January (December: 4.5%) marking the highest level since October 2011 and higher than analyst's expectation of 4.9%. Food inflation rose 20.6% as pork prices jumped 116% YoY (December: 97%) on the back of the African swine fever that has ravaged the country's hog population since last summer. The coronavirus outbreak has also disrupted food supply further contributing to the rise in food prices. In the US, meanwhile, consumer prices rose 2.5% YoY (December: 2.3%) in January following a 1.8% rise in food prices and a 6.2% rise in energy prices. According to preliminary data, the euro area's economy grew by 0.9% YoY in Q4 (Q3: 1.2%), translating to a 1.2% in FY-2019 (2018: 1.8%). Over Q4, there were declines across the major EU economies of Germany (0.5% vs 0.6% in Q3), France (0.8% vs 1.4% in Q3) and Spain (1.8% vs 1.9% in Q3). There was also a slowdown for the UK with Q4 growth at 1.1% (Q3: 1.2%), while over FY-2019 growth came in higher at 1.4% YoY (2018: 1.3%).
For the first time, CBN introduced monthly OTC FX futures contracts for five-year settlement, priced at N379.81/$ on February 13th, 2020. Prior to this time, the longest tenor was a 13- month contract. Notably, this new development is expected to attract more foreign inflows and support the foreign exchange reserve as it provides opportunities to hedge currency risk. Meanwhile, the CBN restricted the importation of milk and its derivatives to 6 companies who have keyed into the Backward integration program, to bolster local milk production. Else-where, the world bank reported that Nigeria is likely to get the loan request of $3 billion targeted at intervention in the power sector. Shedding more light, the loan will be used to finance transmission, distribution and offsetting pending obligations in the power sector.
The Nigerian equities market maintained a downward trend with the ASI, dropping by 1.11% to 27,755.9 pts, with the market capitalization closing at N14.46 trillion as investors lost N162 billion during the week. All sectors closed negative WoW except Cement (+0.37%) and Construction (+0.13%). The deterioration was driven by the Food (-7.27%), Brewers (-2.02%), Oil & Gas (-1.34%), Insurance (-0.94%), Telecoms (-0.53%) and Banking (-0.21%) sectors. The key losers are NESTLE (-10.00%), DANGSUGA (-4.10%), GUINNESS (-16.56%) and MTNN (- 0.85%), while GTB (+1.36%), BUA CEMENT (+1.13%) and Lafarge (+1.31%) yielded positive returns.
At the NTB auction the FG offered N154.38 billion, slightly more than the N147.38 that was maturing. Despite subscription rate improving to 1.86x (N287.8 billion) the FG, once again, just sold what they offered. The 1yr stop rate surprisingly ticked higher to 6.54% (+4bps from the last auction) but declines in the stop rates for the 90-day and 180-day meant that the average stop rate fell by 32bps to 4.51%. At the OMO auction, in a sign of waning interest, subscription came in less than the CBN's offering of N250 billion, at N214.87 billion. The 1yr stop rate was 1bp lower at 13.04%. Also, this week, the February-2020 bond with a value of N606 billion matured, supporting system liquidity and driving the money market lower by -1267bps to 3.00%. In the secondary market, average fixed income yields rose 13bps to 6.95% following a 29bps rise in bond yields to 10.08%. Driving the bond yields higher was a 67bps rise in the JAN -2022 which more than compensated for the 49bps decline in the JUL-2021. NTB yields, meanwhile, declined 4bps to 3.82% mirroring declines for mid-tenor and long-tenor bills.
Take-Away For The Week
Breakdown of pension fund assets (N'million)
This week we feature breakdown of pension fund assets as of the end of December 2019 and how that composition has changed year-on-year. We see that total assets in-creased by 18.3% to N10.22 trillion with the biggest contributor being the 16.33% increase in FGN securities. Domestic shares, meanwhile, declined 8.79%
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