Saturday, October 19, 2019 / 11:54AM / By ARM Research
Data released this week painted a less than rosy economic picture of the two belligerents in the lingering trade war. The US reported a 0.3% MoM decline in retail sales for September (August: +0.6%) which was below consensus expectation of a 0.3% growth. This was the first decline in 7 months and it raised concerns that the slowdown was spreading to the consumer segment. In addition, the US posted a 0.4% MoM contraction in industrial production in September (August: +0.8%). This stemmed from a 0.5% decline in manufacturing production following strike at General Motors and uncertainties triggered by the trade war. Over in China, the economy grew 6% YoY in Q3 (Q2: 6.2%) which was the slowest since 1992 and a miss from consensus expec-tation of 6.1%. However, other data released showed a recovery could be in the offing, as industrial production jumped 5.8% YoY (Aug: 4.4%) and retail sales rose to 7.8% YoY (Aug: 7.5% in September). Finally, the UK and the EU reached a last-minute Brexit withdrawal agreement in which the UK parliament will now vote on tomorrow.
Inflation for the month of September printed at 11.24% YoY, 23bps higher than the previous month. As expected, September's inflation shifted from the moderating trend observed since June buoyed by the partial boarder closure implemented on August 20th which took a toll on food inflation (+34bps to 13.51% YoY). Surprisingly, core inflation ticked up for the first time this year. With the ascent in both core and food inflation, MoM inflation printed at 1.04% (prior month: 0.99 MoM). Elsewhere, the Debt Management Office (DMO) reported Nigeria's total debt to be at N25.7 trillion as at June 2019, an increase of N3.3 trillion compared to same period last year. The growth was supported by increases across both borrowing sources: domestic debt (N1.8 trillion) and external debt (N1.5 trillion).
The ASI closed the week in the red losing 32bps to give a current market cap of N12,875 billion. The sectors leading this downturn were Personal Care (-2.84%), Banking (-1.94%) and Oil & Gas (-0.46%) while Insurance (+2.30%) and Cement (+0.38%) both finished in positive territory. Looking at individual stock performance we saw substantial losses for PZ (-11.9%), GLAXOS-MI (-9.86%), UACN (-10.49%) and UACPROP (-9.91%). FCMB (+5%), CCNN(+4.28%) and FIDELITY(4.24%), meanwhile, were some of the biggest gainers this past week. Majority of the losses seen this week looks to have come at Large Cap stocks as that index was down 35bps, Mid-Cap and Small Cap indices were up 8bps and 1bp respectively.
Lower stop rates was the prevailing theme at this week's primary market auctions, thanks to robust demand supported by inflow of maturing bills. At the OMO auction, subscription printed 2.6x (N1.12 trillion) of the CBN's offerings (N430 billion). As a result, stop rate for the 1yr issuance caved in 4bps to 13.35% -- marking decline for the 4th consecutive auction. Overall, N420.6 billion worth of bills was sold which was short of the N454 billion maturity. At the NTB auction, the FG offered and sold N121.89 billion despite total subscription coming in at N634.11 billion (5.2x). The average stop rate also declined for a 4th consecutive auction, this time by 38bps to 11.58%. Over in the secondary market, excess liquidity (evident in the lower average money mar-ket rate: -+643 bps WoW to 5.5%) supported higher demand in in the NTB segment wherein average yields dipped 20bps WoW to 12.41%. Meanwhile, investors interests in the long-dated instruments resurfaced, as average bond yields shed 13bps WoW to 14.11%. Specifically, the Jan-2026, Feb-2028, Apr-2029 and Jul-2030 bonds all declined by 20+bps.
Take-Away For The Week
Nigeria States' Debt and Total Revenue (N'billions) over H1 2019
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