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Research

NGX ASI fell by 2.18%, Closing Negative in 4 of 5 Trading Sessions of the Week.

Negative sentiment returned to the local bourse as bellwether stocks declined. NGX ASI fell by 2.18%, closing negative in 4 of the 5 trading sessions during the week. It decreased on the back of profit-taking in large caps such as PRESCO (-10.10%) and OKOMUOIL (-10.10%). Consequently, at 52,908.24 points, the equities market’s Year-to-Date return decreased to 23.86% as market capitalisation fell by 2.19% to close at N28.52 trillion.

Market breadth (a measure of investor sentiment) increased in the just concluded week, rising from 0.43x to 0.80x as 36 stocks appreciated against 45 stocks that declined. NAHCO and JAIZBANK topped the market gainers with 22.72% and 15.38% respectively WoW, while CONOIL and WEMABANK were the top losers with declines of  15.04% and 12.33% respectively WoW.

The activity level totally strengthened as the total trade volume and value advanced by 1462.00% and 666.07% WoW. A total turnover of 28.736 billion shares worth N209.060 billion in 23,688 deals was traded by investors on the floor of the Exchange. Trading in the top three equities namely Union Bank Of Nigeria Plc, Transnational Corporation Plc and FBN Holdings Plc (measured by volume) accounted for 27.841 million shares worth N193.488 billion in 1,872 deals, contributing 96.89% and 92.55% to the total equity turnover volume and value respectively.

Outlook for the week

We expect negative performance to persist on the back of profit-taking activities on stocks that have significantly appreciated.

The Nigerian Fixed Income

Last week, there was a marginally bullish sentiment in the bond market as three of the five tenor yields under coverage declined while the 1 and 30-Year tenor yields closed flat at 3.89% and 13.07% respectively. The yields on the 3, 5 and 10-Year bonds compressed by 6bps, 60bps and 1bp respectively.

The Nigerian Treasury Bills Market closed bearish as the 91 and 364-day paper yields inched higher by 50bps and 15bps to close at 3.22% and 5.07% respectively while the 182-day paper closed flat at 4.29%.

In the Money Market space, the Open Repo (OPR) and Overnight (O/N) rates decreased to 6.67% and 7.00% from 13.67% and 14.00% 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

According to the NBS, Nigeria attracted a total of $1.57 billion in capital inflows in the first quarter of 2022, falling by 28.1% compared to $2.19 billion recorded in Q4 2021. When compared to Q1 2021, capital importation decreased by 17.46% from US$1,905.89 million. Notably, the largest amount of capital importation by type was received through Portfolio Investment, which accounted for 60.87% ($957.58 million). This was followed by Other Investment with 29.28% ($460.59 million) and Foreign Direct Investment (FDI) accounted for 9.85% ($154.97 million) of total capital imported in Q1 2022. Meanwhile, foreign portfolio investment (FPI) increased by 48.95% to $957.58 million from $642.87 million recorded in Q4, while foreign direct investment (FDI) reduced by 56.74% from $358.23 million recorded in Q4 2021 to $154.97 million in Q1 2022.

Also, Nigeria`s foreign trade in goods rose quarter-on-quarter by 11% in the first quarter of 2022 (Q1’22) to N13 trillion from N11.7 trillion in Q4’21. According to data from the NBS, the value of exports also rose QoQ by 23% to ₦7.1 trillion in Q1’22 from 5.76 trillion in Q4’21. Similarly, the value of imports rose QoQ by 21% to N5.9 trillion in Q1’22 from N4.87 trillion in Q4’21. NBS further stated that; Re-Exports in Q1 2022, which stood at N115.80 billion, decreased compared to Q1 2021 (N123.46billion) and in Q4 2021 (N284.54billion) by 6.20% and 59.30%, respectively. The top five re-export destinations were Namibia, Cameroun, Ghana, Indonesia, and Malaysia in the quarter under review.

Elsewhere, OPEC, in a statement on Thursday after its 29th OPEC and non-OPEC Ministerial Meeting, announced it had increased Nigeria’s crude oil production quota from 1.766 million barrels a day in June to 1.799 million barrels per day for July. Recall that Nigeria’s crude oil production witnessed increased production levels in May after multiple laggard months, rising by 70,000 barrels per day and averaging 1.42 million bpd ( though below the 1.735 million barrels per day (mbpd) target approved in May 2022).

Oil barrels on stack of golden coins. Growth rise of oil stock prices.

The CBN, in a circular signed by the Director, Payments System Management Department ordered banks and Payment Service Providers to accept indemnity from customers for highly secured online funds transfers above N1m for individuals and N10m for corporate, subject to a maximum of N25m (individual) and N250m (corporate). The CBN also released a final guideline for the registration & operation of Bank Neutral Cash Hubs in Nigeria’. It stated in the guidelines that BNCHs were cash collection centers to be established by registered (licensed) processing companies or Deposit Money Banks based on business needs. It further stated that the hubs would provide a platform for customers to make cash deposits and receive value irrespective of the bank with which their account is domiciled. According to the CBN, setting up the BNCH was to reduce the risks and costs of banks, merchants, and substantial cash handlers in cash management activities, deepen financial inclusion, and leverage shared services to enhance cash management efficiency.

Global and Emerging Market Economic Updates

The U.S. economy added 390,000 jobs in May, better than expected despite fears of an economic slowdown and a roaring pace of inflation, the Bureau of Labor Statistics reported Friday. Job gains were broad-based. Leisure and hospitality led, adding 84,000 positions. Professional and business services rose by 75,000, transportation and warehousing contributed 47,000, and construction jobs increased by 36,000. Average hourly earnings increased 0.3% from April, slightly lower than the 0.4% estimate. The year-over-year increase for wages of 5.2% was in line with expectations.

The European Union, last Monday, decided to ban most Russian oil imports by the end of the year as part of new measures designed to punish the Kremlin over its unprovoked invasion of Ukraine. The sanctions package, the sixth imposed by the EU thus far, will phase out imports of Russian crude oil by sea over the next six months and refined petroleum imports over eight months. According to the European Council President, the new sanctions will effectively cut around 90% of oil imports from Russia to the EU by the end of the year. Notably, the EU imported about $51.5 billion in crude from Russia and $24.7 billion in refined products in 2021.

OPEC and its oil-producing allies agreed last Thursday to hike output in July and August by a larger-than-expected amount as Russia’s invasion of Ukraine wreaks havoc on global energy markets. OPEC+ will increase production by 648,000 barrels per day in July and August, up from planned increases of about 400,000 b/d. The decision comes as the world grapples with surging energy prices. Governments, including the Biden administration, have been calling on producers to raise output to dampen oil’s wild ride. Saudi Arabia and the United Arab Emirates, OPEC’s powerhouse producers, are likely to account for most of the supply increases, with Riyadh earlier signaling it was prepared to increase output to overcome Russian shortages.

Elsewhere, JPMorgan Chase CEO, Jamie Dimon, says he is preparing the biggest U.S. bank for an economic hurricane on the horizon and advised investors to do the same. According to the CEO, two main factors are worrisome; First, the Federal reserve signaling to shrink its balance sheet size, scheduling to ramp up $95 billion a month in reduced bond holdings, and the Ukraine war and its impact on commodities, including food and fuel.

The gas pipeline with flags of Russia and EU

The European Union, last Monday, decided to ban most Russian oil imports by the end of the year as part of new measures designed to punish the Kremlin over its unprovoked invasion of Ukraine. The sanctions package, the sixth imposed by the EU thus far, will phase out imports of Russian crude oil by sea over the next six months and refined petroleum imports over eight months. According to the European Council President, the new sanctions will effectively cut around 90% of oil imports from Russia to the EU by the end of the year. Notably, the EU imported about $51.5 billion in crude from Russia and $24.7 billion in refined products in 2021.

OPEC and its oil-producing allies agreed last Thursday to hike output in July and August by a larger-than-expected amount as Russia’s invasion of Ukraine wreaks havoc on global energy markets. OPEC+ will increase production by 648,000 barrels per day in July and August, up from planned increases of about 400,000 b/d. The decision comes as the world grapples with surging energy prices. Governments, including the Biden administration, have been calling on producers to raise output to dampen oil’s wild ride. Saudi Arabia and the United Arab Emirates, OPEC’s powerhouse producers, are likely to account for most of the supply increases, with Riyadh earlier signaling it was prepared to increase output to overcome Russian shortages.

Elsewhere, JPMorgan Chase CEO, Jamie Dimon, says he is preparing the biggest U.S. bank for an economic hurricane on the horizon and advised investors to do the same. According to the CEO, two main factors are worrisome; First, the Federal reserve signaling to shrink its balance sheet size, scheduling to ramp up $95 billion a month in reduced bond holdings, and the Ukraine war and its impact on commodities, including food and fuel.