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NGX: Nigerian Bourse Rebounds, Erases Previous Day’s loss to Close the Week Positive.

The last trading day of the week saw the local bourse rebound from its previous week’s loss, as the NGX ASI gained by 0.63%, closing positive in 3 of the 5 trading sessions. This improvement is on the back of significant increases in penny stocks such as NEM (+30.89%) and HONYFLOUR (+12.40%). Consequently, at 49,682.15 points, the equities market’s Year-to-Date return increased to 16.31% with market capitalization appreciating by 0.63% to close at N26.80 trillion.

A top view of the trading floor Nigerian Stock Exchange in Lagos.

Market breadth (a measure of investor sentiment) strengthened in the just concluded week, rising from 0.51x to 0.71x as 27 stocks appreciated against 38 stocks that declined. NEM and MBENEFITS topped the market gainers with 30.89% and 20.00% WoW, respectively, while NNFM and FTNCOCOA were the top losers, with declines of  12.79% and 12.12%, respectively WoW.

The activity level was mixed as the total trade volume improved by 28.57% while the total value declined by 7.32% WoW, respectively. A total turnover of 914.443 million shares worth N15.263 billion in 18,021 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities, namely Mutual Benefits Assurance Plc, FBN Holdings Plc, and Access Holdings Plc (measured by volume), accounted for 325.818 million shares worth N1.758 billion in 1,897 deals, contributing 35.63% and 11.52% to the total equity turnover volume and value respectively.

What to Expect in the New Week

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

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 3-Year tenor yield inched higher by 76bps while the 5-Year closed flat at 13.20%. The yields on the 10 and 30-Year bonds compressed by 1bp and 10bps respectively WoW.

There was bullish sentiment in the Nigerian Treasury Bills Market as the 182 and 364-day paper yields compressed by 2bps and 1bp respectively WoW while the 91-day yield closed flat at 3.93%.

In the Money Market space, the Open Repo (OPR) and Overnight (O/N) rates decreased to 13.50% and 13.67% from 14.67% and 15.00% respectively WoW.

Projections for New Week

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

Local Economic Updates

Nigeria’s Gross Domestic Product (GDP) grew by 3.54% (year-on-year) in real terms in the second quarter of 2022. This growth rate declined from 5.01% in the second quarter of 2021, when rapid growth was recorded following the toll the COVID-19 pandemic exacted on the economy in Q2 2020. In addition, the recent rising prices have adversely impacted the second quarter 2022 performance. The Q2 2022 growth rate decreased by 1.47% from the 5.01% growth rate recorded in Q2 2021 and increased by 0.44% relative to 3.11% in Q1 2022. However, quarter-on-quarter, real GDP grew at -0.37% in Q2 2022, reflecting lower economic activity in Q2 2022 than in the preceding quarter.

A head Shot of the Governor of Nigerian Central Bank, Godwin Emiefele

The Central bank of Nigeria released $265 million into two windows of $230mn (Special FX Intervention) and another $35mn (Retail SMIS Auction) to clear outstanding trapped funds from ticket sales. The $265 million was released to airlines operating in the country amid flight suspension threats due to their inability to repatriate their funds from Nigeria.

According to the Central Bank of Nigeria (CBN), the aggregate bank borrowings by oil firms operating in the downstream and upstream subsectors of the Nigerian oil and gas industry increased by 4.4% to print at 5.9tn in H1-2022 (vs. N5.7tn as at Dec-2021). Notably, operators in the downstream, natural gas, and crude oil refining subsector owed banks N4.3tn, while operators in the upstream and services subsectors owed banks N1.7tn.

The National Bureau of Statistics (NBS) reports that Nigeria spent $1 billion on imported iron and steel over the last nine months. Interestingly, between 2016 and 2022, the moribund Ajaokuta Steel Complex received N21.3 billion from the government, according to data gathered from the appropriation bills from the Budget Office of the Federation (2016-2022).

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 prioritises 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 and signals from Saudi Arabia that OPEC could cut output. Brent Crude rose by 4.41% to close at N100.99/barrel.