Weekly Economic and Financial Commentary - Week Ended Nov 22, 2019

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Saturday, November 23, 2019 / 05:00PM / By ARM Research / Header Image Credit: ARM Research 

 

Global Economy

Japan's trade balance improved to a surplus of Y17.3 billion in October from a deficit of Y456.3 billion in same period last year. This is the first trade surplus in four months but printed short of consensus expectation of Y300 billion surplus. The improvement arose from a faster drop in imports (-14.8% YoY) than exports (-9.2% YoY). Specifically, the drop in exports (for the 11th con-secutive month) and the decline in imports (for the 8th month) were largely due to lower sales and purchases from US and China. Meanwhile, annual inflation in Japan remained flat at 0.2% YoY in October despite a sales tax hike from 8% to 10%. Increase in prices of alcoholic beverages and in meals outside demonstrated the tax effect but was suppressed by the decline in energy prices. Over in the EU, manufacturing PMI increased in November to 46.6 (October: 45.9) but remained in contraction territory, according to preliminary data. This is a 3-month high and came as both Germany (43.8 vs 42.1 index ppts in September) and France (51.6 vs 50.7 index ppts in September) recorded improvements while the UK (48.6 vs 50 index ppts in September) slipped slightly deeper into contraction from October.

 

Domestic Economy 

Data released by NBS revealed the Nigerian economy expanded by 2.28% YoY in Q3 2019 buoyed by improvement in both the oil (+6.5% YoY) and non-oil (+1.8% YoY) sectors. Specifically, improved activities were observed in services (+3.5% YoY), Agric (+2.3% YoY), Oil (+6.5% YoY) and manufacturing (+1.1% YoY) sectors. Elsewhere, inflation for the month of October came in higher at 11.61% YoY, +37bps increase from prior month, marking the second consecutive increase since the border closure. Specifically, food inflation rose by 57bps to 14.07% with Farm produce (+87bps to 14.77% YoY) leading the pack. Stripping out volatile food prices, core inflation came in 6bps lower to 8.88% YoY owing to subdued energy prices.

 

Equities

For the third consecutive week, the Nigerian bourse ended the week in green with the ASI advancing +52bps WoW to close at 26,991.42 pts. However, market capitalization lost N43.8 billion due to delisting of Dangote Flour Mills Plc from the NSE. Breweries (+4.19%), Food (+7.01%), Banking (+0.89%), Oil & Gas (+4.75%), Insurance (3.87%) and Construction (+1.28%) sectors spearheaded the gains, outweighing losses in Cement (-0.50%) Telecom (-1.49%) and Personal Care (-4.42%) sectors. On stock performances, NB (+4.12%), GUINNESS (+8.39%), NESTLE (+8.70%), DANGSUGA (+8.97%), GUARANTY (+1.38%), STANBIC (+5.26%) recorded gains muting declines in DANGCEM (-0.35%), AIRTELAF (-2.99%) and UNILEVER (-5.68%) WoW amongst others.

 

Fixed Income

NTB yields closed each day of the week lower, culminating in a 224bps WoW drop to 8.65% - comfortably its lowest level so far this year. This is a continued effect of the CBN's OMO policy which has thinned out fixed income instruments available for domestic investors and ramped up demand for NTBs. Bond yields were little changed in the secondary market, declining 2bps WoW to 12.19%. However, relative to the prior bond auction, there was more movement in the primary market with average stop rate dropping by 152bps to 12.77%. Demand was still strong at the auction with subscription at 1.68x the N150 billion offering. The FG took full advantage, selling off N252.9 billion, of which N95 billion was sold via non-competitive bids. This is the first time this year.

 

Take-Away For The Week

 

Trend in Fixed Income Yields 

This week, we feature the trend in Fixed income yields so far into the second half of the year - specifically NTBs and bond yields. The chart highlights how these yields have performed since the CBN announced its new OMO directive on the 22nd of October.

 

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


Nigeria: Economic Dashboard @ 251119  

Proshare Nigeria Pvt. Ltd.



 Proshare Nigeria Pvt. Ltd.

 

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