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Research

Gains in Guinness Plc, Vitafoam Plc, and Others Drive NGX ASI Up by 0.73%.

The Nigerian bourse at the weekend maintained a positive trend, as the NGX ASI increased by 0.73%, closing positive in 3 of the 5 trading sessions. It improved on significant increases in bellwether stocks such as GUINNESS (+9.88%) and VITAFOAM (+16.26%). Consequently, at 50,045.83 points, the equities market’s Year-to-Date return increased to 17.16% as market capitalisation improved by 0.71% to close at N26.99 trillion.

Guinness Nigeria Warehouse

Market breadth strengthened in the just concluded week, rising from 0.71x to 2.05x as 43 stocks appreciated against 21 stocks that declined. VITAFOAM and ETRANZACT topped the market gainers with 16.26% and 16.23% WoW, respectively, while UNILEVER and MCNICHOLS were the top losers, with declines of 9.63% and 9.46%, respectively WoW.

The activity level was mixed as the total trade volume improved by 30.69% while the total value declined by 15.32% WoW, respectively. A total turnover of 1.195 billion shares worth N12.924 billion in 19,305 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities, namely Sterling Bank Plc, Fidelity Bank Plc, and Access Holdings Plc (measured by volume), accounted for 540.056 million shares worth N1.499 billion in 2,179 deals, contributing 45.18% and 11.60% to the total equity turnover volume and value respectively.

Outlook for the week

We expect positive performance to persist in the coming week as the equities market still presents decent opportunities for investors chasing positive real returns on investments.

The Nigerian Fixed Income Market

Last week, there was mixed sentiment in the bond market as two of the four tenor yields under coverage closed lower, the 10-Year tenor yield inched higher by 3bps while the 10-Year closed flat at 13.65%. The yields on the 3 and 5-Year bonds compressed by 8bps and 25bps respectively WoW.

There was bullish sentiment in the Nigerian Treasury Bills Market as the 182 and 364-day paper yields compressed by 398bps and 1bp respectively WoW while the 91-day yield advanced by 762bps to close at 11.55%.

 In the Money Market space, the Open Repo (OPR) and Overnight (O/N) rates decreased to 12.00% and 12.50% from 13.50% and 13.67% respectively WoW.

Outlook for the week

We expect market activity in the fixed income market to be influenced by liquidity levels and foreign investor participation.

Local Economic Updates

Last week, the National Bureau of Statistics (NBS) reported that capital inflows totaled about US$1.54 billion in the second quarter of 2022, an increase of 75.34% when compared to the amount recorded in the corresponding period of the previous year but a decrease of 2.40% when compared to the capital inflows for the first quarter. Notably, portfolio investments, which accounted for 49.33% of the total capital imported in the review quarter, contributed the highest, followed by other investments (41.09%) and foreign direct investments (9.58%). The review quarter’s most significant portion of capital inflows, portfolio investments, saw a 20.91% quarterly slowdown, which was the main cause of the quarter’s decrease in total capital imported.

Oil revenue decreased by 29.0% q/q to N790.0bn in Q1-2022 from N1.1tn in the preceding quarter and by 17.1% y/y from its N956.0bn print in Q1-2021, according to data from The Central Bank of Nigeria. The decline in revenue can be largely attributable to oil theft, pipeline damage in the country, and poor production levels. 

To stop oil theft, the Nigerian National Petroleum Corporation (NNPC) declared that it would monitor its pipelines in the Niger Delta using video surveillance similar to that of Saudi Aramco. The business also announced that after the ongoing rehabilitation of its refineries, it would outsource its contracts for operations and maintenance.

Additionally, the Federal Government got N1.1 trillion in indirect taxes in H2 2012, up 10.3% from the N984.3 billion earned in H2 2001. Indirect taxes are taxes paid to the government by a producer or merchant and then transferred to the customer.   Value-added taxes, customs fees, and import levies are a few examples.

Global and Emerging Market Economic Updates

Last week, the global equities market declined following comments from the U.S. Fed Chair, Jerome Powell, at the Jackson Hole Economic Symposium. Powell noted the risks of a possible economic slowdown and weakening labour market as the FOMC prioritizes policy tightening to bulwark inflation down to the 2% level. According to him, a one-month moderation remains insufficient to foretell the inflationary pressures in the coming period. 

Also, in the U.S., the Personal Consumption Expenditure (PCE) price index, the preferred inflation measure, was released. The report shows a moderation to 6.3% in Jul’22 from 6.8% in the previous month. The Core PCE Price Index, which excludes food and energy prices, also rose slower at 4.6% in July, slightly below the 4.8% in the previous month and 4.8% estimate. On a monthly basis, Core PCE slowed to 0.1% from 0.6%, while PCE reported a negative growth of -0.1% from 1.0% in the previous month. During the week, the Crude oil price nudged higher on the back of a possible OPEC supply cut.

Elsewhere, China’s National Bureau of Statistics released that China’s industrial output growth slowed to 3.8% y/y from 3.9% in June because of the new Covid measures imposed in manufacturing hubs in Shenzhen and Tianjin. Last week, the Brent crude oil gained further on the back of released API data revealing U.S. inventories continue to decline in addition to other supply headwinds, such as a terminal backlog in the black sea