Weekly Economic and Financial Commentary – WE 12th Oct, 2018

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Friday, October 12, 2018   23.45PM / By ARM Research

 

Global Economy

Global equities market witnessed landslide loss during the week, with the MSCI World index reaching a 1-year low on Thursday and set to close the week with a record loss. The sell-off largely reflected a shift in investors’ appetite for fixed income instruments following rising rates on long dated assets. Trade data released during the week revealed that China’s trade surplus with the US widened to a record high of $34.13 billion (Aug: $31.05 billion) in September, larger than China’s overall trade surplus of $31.69 billion for the month. Headline inflation rate in the US increased at a slower pace than expected in September (0.1% MoM vs. 0.2% MoM in August) to 2.3% YoY (August: 2.7%), with the core CPI rising 2.2% YoY - unchanged from the previous month.

 

Domestic Economy

According to recent data from the Central Bank of Nigeria (CBN), capital importation for the month of August hit the lowest level in 14 months, as offshore funds into Nigeria de-clined 38% MoM to $799 million. The plunge in capital importation is attributed to sizable decline in Foreign Portfolio Investment (-48% MoM to $421 million) and Foreign Direct Investments (-54% MoM to $155 million) into the country. On the former, FPI flows to equity (-14% to $130 million), bonds (-50% to $7.3 million) and money market instruments (-56% to $283.9 million) moderated during the month. Elsewhere, in its bid to reduce the exclusion rate to 20% by 2020, the CBN proposed the establishment of the Payment Ser-vice Banks, to provide financial services to low-income earners and the unbanked population.

 

Equities

The Nigerian equity market closed the week on a positive note, with the NSE ASI appreciating by 12bps WoW to close at 32,456.98 index points. The bullish performance reflected gains in banking counters – Stanbic (+6.12%), FBNH (+2.25%) and Guaranty (+0.27%) – as investors took advantage of currently depressed valuations to position ahead of Q3 earn-ings releases. Apart from the Banking sector which gained +1.57% WoW, the Food (+0.26%) and Cement (+0.26%) sectors also closed positive. On the other hand, the Personal Care (-2.31%), Brewers (-1.73%), Oil & Gas (-1.69%), Insurance (-1.18%) and Real Estate (-0.03%) sectors booked losses.

 

Fixed Income

Average yields expanded 7bps WoW to 14.28% in the fixed income market following sell off at both ends of the curve. The surge in yields was compounded by the squeeze in liquidity following CBN’s OMO sale, wherein a total of 249 billion worth of 182-day and 364-day bills were sold at respective rates of 12.50% and 13.50%, while the 91-day paper ended with a no sale. Overall average T-bills and Bond yields rose +7bps and 8bps WoW to 13.70% to 14.86%.

 

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

 

TAKEAWAY: Capital flows hits rock bottom 

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Footnotes                                                                                      

1.              Weekly Economic and Financial Commentary – WE 05th Oct, 2018

2.             Weekly Economic and Financial Commentary – WE 21st Sept, 2018

3.             Weekly Economic and Financial Commentary – WE 07th Sept, 2018 

4.             Weekly Economic and Financial Commentary – WE 31st August, 2018

5.              Weekly Economic and Financial Commentary – WE 24th August, 2018

6.             Weekly Economic and Financial Commentary – WE 17th August, 2018

7.              Weekly Economic and Financial Commentary – WE 10th August, 2018

8.             Weekly Economic and Financial Commentary – WE 03rd August, 2018

9.             Weekly Economic and Financial Commentary – WE 13th July 2018

10.         Weekly Economic and Financial Commentary – WE 14th June 2018

11.           Weekly Economic and Financial Commentary – WE 20th July, 2018 

 

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