Saturday, February 29, 2020 / 03:00PM / By ARM
Research /Header Image Credit:ARM
The coronavirus, Covid-19, has now infected more than 83,000 in at least 53 countries. Significant selloffs ensued across global markets this week, as cases of the virus outside China jolted up. The S&P 500 which, just last week reached a record high, has slipped into a correction after falling 12% in 6 days -- on track for its worst week since the 2008 crisis. Stock markets in Japan, China and Europe also went into correction this week . Instead, investors have flocked into safe havens such as gold - which touched an 8year high of above $1600 recently - and the US 10-yr note whose yield dropped to a new record low of 1.1%. Brent oil prices slipped 9% WoW to a 31-month low of 51.05 USD/bbl on concerns of demand. On economic data, India's GDP expanded at a slower pace of 4.7% YoY in Q4 19 (Q3 20) after growth in Q3 19 was revised higher to 5.1% from 4.5%. This marks the weakest growth since Q1 13 and was weighed down by declines in fixed capital formation and exports, offsetting improvement in private consumption.
Data from the NBS showed Nigeria's economy expanded moderately by 2.55% YoY in Q4 19, buoyed by growth in non-oil GDP (Q4 19: 2.3% vs Q3 19: 1.8% YoY). Meanwhile, oil GDP grew at a slower pace of 6.4% YoY relative to the prior quarter (6.5% YoY). The slowdown in oil sector mirrors reduced crude oil production recorded during the period (Q4 19: 2.00mbpd vs Q3 19: 2.04mbpd) due to improved compliance by Nigeria to the OPEC+ oil production cut. On the other hand, the performance in the non-oil sector was hinged on growth in Services sector (+50bps to 4.0% YoY) and Manufacturing (+10bps to 1.2% YoY) while agricultural sector flatlined at 2.3% YoY. For the services sector, the growth was supported by improvement in ICT and Financial services sub-sectors. Overall, the Nigerian economy grew by 2.3% YoY over FY 19 which is an improvement from the 1.9% growth reported in 2018. Elsewhere, in a bid to curb subjective bills unrelated to actual consumption, NERC recently placed a ceiling on estimated bills issued by Discos to unmetered customers, pending the supply and installation of meters by Discos to consumers. The energy cap only apply to R2 (residential-single and 3 phase) and C1 (Commercial - single and 3 phase) customers.
Yet another downturn for the equity market with the NSE ASI declining by 4.3% to 26,216.46 points with the total market capitalization rounding off at N13.66 trillion. With Nigeria reporting the first confirmed case of coronavirus in sub-Saharan Africa, investors alarm over a potential pandemic has deepened stock market losses for the week. All sectors observed closed at a loss excluding Cement (+0.59%). The sectorial decline includes: Banking (-12.19%), Brewers (-13.95%), Oil & Gas (-4.40%), Construction (-3.96%), Telecom (-3.47%) and Insurance (-3.91%) sector. Meanwhile, major driver of the losses was observed in stocks like ACCESS (-12.77%), FBNH (-18.26%), STANBIC (-15.6%), GUARANTY (-14.85%), UBN (-14.47%), STANBIC (-15.58%), NB (-16.41%), OANDO (-18.18%) MTNN (-5.17%), amongst others.
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Subscription at this week's NTB auction was the strongest so far this year, at 2.5x (N261.53 billion) the FGN's offering of N104 billion. Nonetheless, in typical fashion, the FG only sold what they offered. The surge in de-mand drove average stop rate down 28bps to 4.23%. At the OMO auction, the CBN offered N350 billion worth of bills (in view of a N927 billion maturity) but sold N480 billion after strong subscription of N545.23 billion. The 1-yr stop rate also dropped, by 2bps to 13.00%. Meanwhile, we noted a significant surge in the money market by 14ppts from yesterday to 16% today. Speaking with our sources, we confirmed the apex bank enforced a N700 billion CRR debit on DMBs today. This comes after news last week suggested the apex bank would be enforcing discretionary CRR application on banks that bid at OMO auctions. Meanwhile, at the secondary mar-ket, despite a 14bps WoW rise in NTB yields to 4.01%, average FI yields fell 28bps to 6.53% as strong demand for bond led their yields 70bps lower to 9.05%. Short-tenor bonds saw the biggest interest: March-2025 (-170bps), March-2024 (-131bps), April-2023 (-108bps). Meanwhile, selloffs at the long-tenor ends of the drove the increase in NTB yields.
Take-Away For The Week
Loans to private sectors (N'million)
This week, we feature the quantum growth in loans across various sectors between June 2019 and January 2020. In total, overall private sector loans increased by N1.9 trillion which helped boost growth in the finance sector which grew by 20.4% YoY in Q4 19, according to the latest GDP figures. We expect growth to continue in the finance sector as loans continue to increase.
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