June 01, 2019 / 07:00AM / By ARM Research
Second estimate of the US Q1 2019 GDP released this week, showed a downward revision to 3.1% from 3.2% previously reported. The revision stems from much slower growth in nonresidential fixed investment and private inventory investment as well as an increase in imports, all of which offset the upward revisions to exports and personal consumption expenditures (PCE). Meanwhile, US-instigated trade tensions took a new turn this week, following a surprise announcement by US president Trump to impose 5% tariff on all Mexican imports, effective June 10th. This was done to curb illegal immigration of Mexicans into the US via the southern border, with threats of imposing additional 25% duties in coming months if the objective is not met. Elsewhere, China’s Manufacturing PMI returned to a contraction in May printing at 49.4 from 50.1 in the previous month. This largely reflects slowdown in manufacturing activities spurred by trade war with the US.
Earlier this week, President Buhari signed the appropriation bill of N8.92 trillion into law. The signed budget is N90 billion higher than the initial budget proposed by the President, comprising N10 billion to Zamfara victims of bandit attacks, N23 billion for lawmakers’ severance packages and N66 billion increase in allocations to security and defense institutions. However, key budget assumptions were left unchanged – oil production: 2.3 mbpd, oil price: $60/bbl., and exchange rate: N305/USD. Elsewhere, the National Bureau of Statistics released data on sectoral Value Added Tax (VAT) for Q1 2019 which showed a 7% YoY increase in total VAT generated to N289 billion (-3% QoQ). Of the total VAT generated, N137 billion is sourced locally, N99 billion via non-import (foreign) VAT and N53 billion via NCS-import VAT. The other manufacturing, professional services and commerce sectors remained the top contributors to local VAT generated – making up 52% of local VAT.
The Nigerian Equities market closed positive this week with the NSE ASI appreciating 0.61% WoW to close at 31,069.37 points and market capitalization gaining N82.84 billion. Notably, the banking (+3.06%), food (+2.58%), oil & gas (+5.96%), construction (+2.15%) and insurance (+1.30%) sectors spurred the gains, offsetting losses in the personal care (-0.99%), brewers (0.61%) and cement (-0.25%) sectors. A close evaluation of the market’s performance reveals interest across various stocks such as MANSARD: +10.00%, UBA: +8.70%, ACCESS: +5.17%, ZENITH: +5.79%, SEPLAT: +5.75%, DANGFLOUR: +4.66%, CCNN: +7.14%, JULIUSBERGER: +3.70%, NESTLE: +3.57%, and GTBANK: +1.61%.
At the NTB auction held during the week, N67.4 billion worth of bills was sold (same as offered), with subscription coming strong at N195 billion (2.9x the amount offered). The upbeat demand placed downward pressure on stop rates which, on average, dipped 21 bps to 11.38% — 90-day (unchanged at 10%), 182-day (-35 bps to 11.95%) and 365-day (-29 bps to 12.2%). This sparked increased demand at the NTB secondary market, as average yield contracted 23bps WoW to 11.95%, following interest in the 90-day and 182-day bills. Meanwhile, average bond yields, closed flat WoW at 13.94%, following increased demand for the JUL 21(-53bps WoW) bond, which offset selloff of the MAR 25 (+22 bps WoW) and JAN 26 (+12bps WoW) bonds respectively.
Take-Away For The Week
Capital Importation trend
This week, we feature the trend in capital importation over a year, revealing trend in foreign portfolio investments (FPI), foreign direct investment (FDI) and other investments.
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