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NGX extends Negative Trends to the First week of Q4’22.

The local bourse extended its bearish trend as the NGX ASI closed negative by 3.41% WoW, closing negative in 3 of the 4 trading sessions. It fell on significant decreases in bellwether stocks such as AIRTELAFRI (-10.00%) and GTCO (-4.50%). Consequently, at 47,351.43 points, the equities market’s Year-to-Date return decreased to 10.85% as market capitalisation fell by 3.41% to close at N25.79 trillion.
Market breadth (a measure of investor sentiment) weakened in the just concluded week, declining from 0.76x to 0.24x as 46 stocks depreciated against 11 stocks that appreciated. MULTIVERSE and GEREGU topped the market gainers with 21.95% and 20.90% WoW, respectively, while NASCON and CORNEST were the top losers, with declines of 13.64% and 10.71%, respectively WoW.
The activity level weakened as the total trade volume and value declined by 41.69% and 15.08% respectively. A total turnover of 0.59 billion shares worth N8.84 billion in 17,183 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities, namely Guaranty Trust Holding Company Plc, Sterling bank Plc and Zenith Bank Plc (measured by volume), accounted for 239.637 million shares worth N3.546 billion in 4,375 deals, contributing 40.83% and 40.13% to the total equity turnover volume and value respectively.

Outlook for the week

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

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 higher, while the 5 and 10-Year tenor yield closed flat. The yields on the 3, and 10-Year bonds advanced by 177bps, and 9bps respectively WoW.

There was mixed sentiment in the Nigerian Treasury Bills Market as the 91-day yields closed flat, and the 182-day paper yields advanced by 12bps  while the 364-day paper yields compressed by 2bps WoW.

In the Money Market space, the Open Repo (OPR) and Overnight (O/N) rates increased to 16.25% and 17.25% from 15.50% and 16.00% 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.

The Global and African Market

There was positive sentiment in the global market as all the six indices under coverage closed higher WoW.

In the African Market, there was mixed sentiment as 2 of the 4 indices under coverage declined WoW. S’A JALSH and EGX 30, the gainers, improved by 2.25% and 2.63% WoW. Conversely, the NGX and NSE, the losers, fell by 3.41% and 1.25% respectively.

Outlook for the week

Market activity would likely be dictated by the hawkish stance of the FOMC in the near term.

Local Market Update

Last week, President Muhammadu Buhari has presented the proposal for the 8th and final budget of his administration. The N20.15 trillion Budget was termed a Budget of Fiscal sustainability and transition. Buhari disclosed this on Friday morning while presenting the budget to the National Assembly. Buhari noted that the expenditure policy of the budget is to achieve policies set in the National Development Plan, 2021-25, which includes human development, food security, energy efficiency, and others. The details of the Budget include: The total package of N20.15 trillion, recurrent expenditure of N8.27 trillion, capital expenditure of N5.15 trillion, and debt service of N6.31 trillion, oil benchmarked at $70 per barrel, with daily production of 1.69 barrels per day, and an exchange rate of N435 to the dollar.

The Nigerian National Petroleum Corporation Limited has declared a profit of N674bn after tax for the year 2021. According to NNPCL, the Board has approved the audited financial statements for 2021. The Group Managing Director, Mele Kyari, was quoted as saying; “NNPCL has progressed to a new performance level, from N287bn profit in 2020 to N674bn profit after tax in 2021, climbing higher by 134.8% year-on-year profit growth.”

The Nigerian National Petroleum Company Limited (NNPC) says it uncovered an illegal 4-kilometre (km) pipeline from Forcados terminal to the sea, and a loading port that had operated undetected in the last nine years. Mele Kyari, group chief executive officer (GCEO), NNPC Limited, said this on Tuesday when he appeared before the senate joint committees on petroleum (upstream and downstream), and gas. He said the pipeline was found during a clampdown on theft in the past six weeks. “Oil theft in the country has been going on for over 22 years but the dimension and rate it assumed in recent times is unprecedented,” Kyari said.

Gasfield pipeline in Alberta Canada.To view my other Oil Industry related images

Recently, the Obajana Cement Plant powered by the Dangote Industries, the biggest in Nigeria was shut down by the Kogi State government, over allegations that the purchase of the plant was flawed. This has once again sent disturbing signals to the global community, especially as it has to do with investments, mergers, and acquisitions. Aliko Dangote the businessman and President of the Group has demonstrated a remarkable commitment to investing in Nigeria, and the Obajana Cement plant is one of them.

Global and Emerging Market Economic Updates

A group of some of the world’s most powerful oil producers on Wednesday agreed to impose deep output cuts, seeking to spur a recovery in crude prices despite calls from the U.S. to pump more to help the global economy. OPEC and non-OPEC allies, a group often referred to as OPEC+, decided at their first face-to-face gathering in Vienna since 2020 to reduce production by 2 million barrels per day from November. Energy market participants had expected OPEC+, which includes Saudi Arabia and Russia, to impose output cuts of somewhere between 500,000 barrels and 2 million barrels.

The US economy added 263,000 jobs in September, the Bureau of Labor Statistics reported Friday, slightly more than economists had estimated. While still robust, the headline number marks the second consecutive month of falling totals. That, coupled with job openings showing some sharp declines, points to a labor market slowdown an outcome the Federal Reserve is seeking as it battles decades-high inflation. “The job market is slowing gracefully, moderating jobs and wage growth smoothly as the Federal Reserve searches for signs of cooling inflation,” Daniel Zhao, senior economist for Glassdoor, said in a statement. “The job market is doing its part for a soft landing, keeping job gains positive and moderating wage gains.”

The U.K. government on Monday reversed a plan to scrap the top rate of income tax, after a public backlash and major market turbulence. The new government had announced a swathe of tax cuts just weeks into its tenure, but they were poorly received by financial markets. Taking the top rate of tax paid on incomes over £150,000 ($166,770) from 45% to 40% was seen as particularly politically toxic as Brits deal with a cost-of-living crisis.

Kristalina Georgieva, managing director of the International Monetary Fund, told an audience at Georgetown University on Thursday that the IMF is once again lowering its projections for global economic growth in 2023, projecting world economic growth lower by $4 trillion through 2026. “Things are more likely to get worse before it gets better,” she said, adding that the Russian invasion of Ukraine that began in February has dramatically changed the IMF’s outlook on the economy. “The risks of recession are rising,” she said, calling the current economic environment a “period of historic fragility”. Meanwhile, U.S. Treasury Secretary Janet Yellen, on the other side of town at the Center for Global Development, focused on how the U.S. and its allies could contribute to making longer-term investments to the global economy.