Weekly Economic and Financial Commentary - Week Ended Dec 27, 2019

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Saturday, December 28, 2019 / 08:30PM / By ARM Research /Header Image Credit: ARM Research 

 

Global Economy

Retail sales in Japan contracted in November, albeit at a lower pace of -2.1% YoY relative to October's decline of -7.0% YoY. The two months consecutive decline is related to the 20bps increase in sales tax that came into effect on the 1st of October which has prompted consumers to cut spending. Further breakdown revealed the decline was supported by weak demand for general merchandise (-4.4% YoY), motor vehicles (-5.9% YoY) and machineries (-7.8% YoY). Similarly, according to preliminary results, Japan's industrial production, contracted in November to -8.1% YoY (October: -7.7% YoY) . The decline is largely attributed to an 18.8% YoY fall in production machinery and an 8.6%YoY drop in electrical machinery.

 

Domestic Economy 

This week, the CBN issued a revised guide to charges by banks, other financial and non-bank financial institutions which will be effective from January 1st, 2020. Precisely, the revised charges came in the form of: (i) lower card maintenance fee on both FCY denominated cards and Naira cards; (ii) lower ATM withdrawal charge; and (iii) lower electronic transfers fee, in order to reflect current developments in the market. While this has a positive impact on end users, the revised guidelines negatively impacts Nigerian banks. For context, E-business in-come, account maintenance charge, ATM charges and transfer related charges have contributed ~ 30% on average to Non-Interest Revenue (NIR) over the past two years.

 

Equities

The Nigerian bourse ended the week in red, loosing 41bps to close at 26,416.48 pts with investors losing N51.3 billion during the week. This week's loss was anchored by Telecom (-437bps), Breweries (-49bps) and Banking (-12bps) sectors. Sell-offs in MTNN (-6.67%), GUINNESS (-6.24%), GUARANTY (-2.03%), FBNH (-3.85%), WEMA (-8.57%) and ETI (-3.79%) outstripped gains in NESTLE (+10.00%), UNILEVER (+8.91%) and ACCESS (+3.65%) amongst other stocks. Meanwhile, from 2nd of January 2020, the rules governing free float requirements for issuers listed on the exchange will be effective. Precisely, companies listed on the Premium board would require a minimum free float of 20% of issued and fully paid up shares or a free float value of N40 billion and above. Furthermore, the Main board and ASeM board will require 20% and 15% of issued and fully paid up shares or free float val-ue of N20 billion and N50 million respectively. We expect this to further improve liquidity in the equity market.

 

Fixed Income

Average fixed income yields dipped 21bps WoW to end the week at 8.15%, a new low for the year. Each week now seems to end with a new record low for the year. The decline this week was led by contraction at the both ends of the curve. Yields at the short end fell 24bps WoW to 5.60% mirroring declines across all tenors with long-tenor papers recording the most de-cline of 52bps. Similarly, average bond yields contracted by 19bps WoW to 10.71%, with majority of the declines seen in the short tenor bonds - Feb-2020 (-84bps), Jul-2021 (-96bps), Apr-2023 (-90bps) and Mar-2024 (-85bps).

 

 

Take-Away For The Week

 

Stocks with free float below the minimum requirement

In view of NSE publication on implementation of free float rule, we feature stocks listed on the NSE that do not meet up to the minimum free float requirement.

 

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

 

Nigeria: Economic Dashboard @ 131219 

 

 

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