Weekly Economic and Financial Commentary - Week Ended Oct 04, 2019

Proshare

Saturday, October 05, 2019 / 10:14AM / By ARM Research 

 

Global Economy

According to ISM, U.S manufacturing sector slipped further into contraction in September, with PMI at 47.8 index points (August: 49.1), its lowest level in a decade and well below analysts' expectations of 50.1index points. Clearly, this  marks the second consecutive month of contraction within the sector. Also, US's trade deficit for August increased by 1.6% MoM to $54.9 billion, driven by faster rise in imports (+0.5%) relative to exports (+0.2%). However, its trade deficit with China reduced this month by 2.3% MoM. Meanwhile, PMI data released for China showed an improvement in manufacturing activity as it hit its highest level since February 2018 (51.4 vs 50.4 in August). Elsewhere, Markit's services' PMI contracted in the UK's services sector to 49.5 index ppts vs (August: 50.6 index ppts), as BREXIT uncertainty intensifies.  

 

Domestic Economy 

Nigeria's 2020 proposed budget was reviewed upwards by N727 billion to N10.729 trillion (previously: N10.002 trillion), hinged on the expectation of higher crude oil prices and a boost in revenue from Nigerian Customs Service (NCS). Specifically, the Crude oil benchmark for 2020 budget is now $57 (prior: $55), and the budget would be presented by president Buhari next Tuesday. Elsewhere, the CBN delivered another letter to Deposit Money banks (DMBs), increasing the minimum loan to deposit ratio (LDR) from 60% to 65%, with a deadline of December 31st, 2019. Accordingly, failure to meet this requirement shall result in a levy of additional Cash Reserve Requirement equal to 50% of the lending shortfall implied by the target LDR. Specifically, 12 banks were debited this week to the tune of N499.1 billion, as the penalty of not meeting the prior LDR requirement.

 

Equities

The blood shed in the equities market continued this week, with the banking sector taking a major hit (-3.29% WoW). Asides the general negative sentiment towards the Nigerian bourse, recently released directive for DMBs to increase minimum LDR to 65% further amplified the selloffs. Consequently, the NSE ASI shed 248bps to 26,987.45 points while market cap lost N334.7 billion. All sectors on the bourse anchored the decline save for Cement and Insurance which gained +0.29% and 2.80% respectively. A further glance at the stock performances revealed sell offs in GUARANTY (-3.99%), ZENITH (-2.70%), NB (-4.10%), NESTLE (-6.65%), SEPLAT (-0.29%) and MTN (-4.41%), muting gains in DANGCEM (+0.21%), WAPCO (+1.56%) and CONTINSU (20.11%).

 

Fixed Income

Rates movement in the secondary market over the week was quite bullish with average fixed income yields losing 3bps WoW to close at 13.74%. At the short end of the curve, NTB yields dropped 4bps as investors took positions given the high level of subscription and unmet demand witnessed at both OMO and NTB auctions earlier in the week. At the auctions this week, average stop rate for NTB s dropped by 9bps to 11.96% with subscription level reaching 2.5x. Similarly, after keeping its 1yr OMO stop rate almost unchanged all through September, the CBN cut the rate by 8bps to 13.4% at its first auction this month with subscription level reaching 2.3x. Analysing the trend in yields movement, mid-tenor and long-tenor bills experienced increased demand that brought their respective yields lower by 15bps and 17bps WoW. Elsewhere, at the long end of the yield curve, bond yields fell slightly by 2bps to 14.24%. We saw more demand for Jan-2026 and Mar-2027 with  yields dropping by 19bps and 16bps respectively. 

 

Take-Away For The Week

Trend in Commercial Bank Loans, LDR and Liquidity Ratio

This week, we feature recent trend in commercial banks loans across sectors, loan to deposit (LDR) trend and liquidity ratio. Going by the data, total deposit money banks loan to deposit ratio improved to 61.1% in August from 57.6% in June 2019. Also, a bulk of the loans were channeled to the manufacturing sector.

 


Proshare Nigeria Pvt. Ltd.

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


 

 Nigeria: Economic Dashboard @ 041019 

Proshare Nigeria Pvt. Ltd.

 


Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

 

Do you wish to be included in the Events Calender? 

Kindly email business@proshareng.com or/and market@proshareng.com Tel: 0700PROSHARE (070077674273) to share information about your Business, Economic and Financial Markets event.

 

Proshare Nigeria Pvt. Ltd.

 

Most Recent Weekly Commentaries

1.      Weekly Economic and Financial Commentary - Week Ended Sept 27, 2019

2.     Weekly Economic and Financial Commentary - Week Ended, Sept 20, 2019

3.     Weekly Economic and Financial Commentary - WE 13 September 2019

4.     Weekly Economic and Financial Commentary - WE 16 August 2019

5.     Weekly Economic and Financial Commentary - WE 09 August 2019

6.     Weekly Economic and Financial Commentary - WE 02 August 2019

7.      Weekly Economic and Financial Commentary - WE 26 July 2019

8.     Weekly Economic and Financial Commentary - WE 19 July 2019

9.     Weekly Economic and Financial Commentary - WE 12 July 2019

10.  Weekly Economic and Financial Commentary - WE 05 July, 2019

11.   Weekly Economic and Financial Commentary - WE 28th June, 2019

12.   Weekly Economic and Financial Commentary - Week Ended, June 21, 2019

13.   Weekly Economic and Financial Commentary - WE 14th June, 2019

14.   Weekly Economic and Financial Commentary - WE 7th June, 2019

15.   Weekly Economic and Financial Commentary - WE 31st May, 2019

16.   Weekly Economic and Financial Commentary - WE 24th May, 2019

17.   Weekly Economic and Financial Commentary - WE 17th May, 2019

 

Proshare Nigeria Pvt. Ltd.

 

Related News

1.      What To Expect From The Markets This Week - 071019

2.      NASD OTC Market CAP Decreased By -0.78% WoW To Close At N502.64bn

3.      Market Review and Round-Up of Corporate News Announced During The Week Ending 041019

4.      Investors Lose N334.71bn WoW As NSEASI Dips By -2.48% To Close The Week Negative

5.      NSE Hosts Inaugural Ring the Bell for Financial Literacy

6.      Interswitch Limited Bond Issue Coming Soon

7.      Nigerian Banks Improve NPLs Post-recession

8.      MainOne Lands Submarine Cable in Cote D'Ivoire

9.      CBN Grants Banks' Approval To Debit Loan Defaulters

10.   Border Closure Hitting The Price of Rice

11.   BETAGLAS On Track To Complete $30m Capacity Expansion Investment In Nigerian In June 2020

12.   FHC Upholds The Imposition of Consumption Tax in Lagos State

13.   AfCFTA: Opportunities for Nigeria's National Development - Desmond Guobadia

14.   Nigeria in 1min: Economic, Business and Financial Headlines - 041019

15.   The Stagflation Spectre Looms - LBS Executive Breakfast Session - Oct 2019

16.   Canadian Securities Regulators Propose Changes To Auditor Oversight Rules

17.   Report on The Regular Basel III Capital Monitoring and Compliance Of EU Banks With Liquidity Measure

18.   Banks Reassess Support for the Creative Arts and Entertainment Industries

19.   Banking Sector Update - CBN Makes Statement Move On Intention To Drive Lending

20.   Nigerian Oil And Gas Sector- Q3 2019 Earnings Preview

21.   Maritime AntiCorruption Network (MACN) to hold Session On Service Delivery at The Nigerian Ports

22.   Debtor Notice: Between Interstella Communications Limited and CBN


Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP