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NGX Records Negative Performance in 4 of 5 Trading Sessions as ASI declined by 0.22%

Bearish sentiment returned to the local bourse after 5 consecutive weekly gains. NGX ASI declined by 0.22%, closing negative in 4 of the 5 trading sessions during the week. 

Bearish sentiment returned to the local bourse after 5 consecutive weekly gains. NGX ASI declined by 0.22%, 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 FLOURMILL (-10.74%%) and MTNN (-4.82%). Consequently, at 52,979.96 points, the equities market’s Year-to-Date return decreased to 0.22% as market capitalisation fell by 0.24% to close at N28.56 trillion.

Market breadth (a measure of investor sentiment) decreased in the just concluded week, falling from 1.56x to 0.88x as 37 stocks appreciated against 42 stocks that declined. MCNICHOLS and TRANSCORP topped the market gainers with 58.96% and 20.70% respectively WoW, while ROYALEX and ACADEMY were the top losers with declines of  25.49% and 18.54% respectively WoW.

The activity level was positive as the total trade volume and value advanced by 65.99% and 16.90% WoW. A total turnover of 3.021 billion shares worth N31.784 billion in 29,153 deals was traded this week by investors on the floor of the Exchange. Trading in the top three equities namely FCMB Group Plc, Jaiz Bank Plc and Transnational Corporation Plc (measured by volume) accounted for 1.698 billion shares worth N4.095 billion in 2,188 deals, contributing 56.21% and 12.88% 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 mixed sentiment in the bond market as two of the five tenor yields under coverage declined, the 1 and 10 Years tenor yields closed flat at 3.89% and 12.86% respectively while the yield on the 5-Year tenor bond inched higher by 8bps. The yields on the 3 and 10-Years bonds compressed by 4bps and 31bps respectively.

There was a quiet outing in the Nigerian Treasury Bills Market as the 91, 182 and 364-day paper yields closed flat at 2.99%, 3.61% and 4.87% respectively WoW.

In the Money Market space, the Open Repo (OPR) and Overnight (O/N) rates increased to 12.25% and 12.50% from 8.67% and 9.17% 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

The Consumer Price Index (CPI), which measures inflation, rose by 16.82% Year-on-Year (YoY) on Apr’22. This is 0.90% higher than the rate recorded in Mar’22 (15.92%) but 1.30% lower than Apr’21 (18.12%). The headline inflation spiraled upward, in line with the previous month’s hike. The increase recorded in Apr ’22 was on the back of price acceleration in the food and core subindices, representing the highest rate recorded since Aug`21. Also, on a month-on-month (MoM) basis, the Headline Index increased to 1.76% in Apr’22; this is a 0.02% increase from the rate (1.74%) recorded in the previous month (Mar’22). The hike in monthly headline inflation (Core and Food Subindices) mirrors the inflationary pressures faced globally, exacerbated by the ongoing Eastern Europe crises which have given rise to commodities and energy prices.

A Farm in with Shrubs

The African Development Bank has approved a $1.5 billion emergency food production facility for about 20 million farmers in Africa. The fund is expected to help avoid a looming food crisis exacerbated by the war between Russia and Ukraine. The AfDB made this announcement on Friday via its Twitter handle claiming the facility will rapidly produce 30 million metric tonnes of food as well as support about 20 million farmers. The war between Ukraine and Russia has led to a rise in food prices, especially for commodities such as wheat, maize, soybeans, and other grains which many African countries rely on for their staple food.

Following the final approval for a Payment Service Bank (PSB) license granted by the Central Bank of Nigeria (CBN), MTN Nigeria’s fintech subsidiary, MoMo Payment Service Bank (MoMo PSB) Limited has formally commenced operations. MTN said this follows a successful pilot initiated on May 16, 2022, which was in commemoration of the launch of MTN’s GSM operations on May 16, 2001, and listing by introduction on the Nigerian Exchange Limited on May 16, 2019, and a key milestone in delivering the company’s Ambition 2025 strategic priorities. Also, in a stock market statement, Airtel Africa announced subsidiary SmartCash PSB had started providing services through selected retail outlets with plans to expand across Nigeria in the coming months. Airtel Africa secured a full Payment Service Bank license from the Central Bank of Nigeria (CBN) through its subsidiary in April, has received an in-principle approval in 2021.

Lastly, the federal government has introduced a new telecommunications tax to provide finance to subsidize the cost of provision of health care services to vulnerable persons in Nigeria. This is contained in the National Health Insurance Authority Bill 2021 signed into law by President Muhammadu Buhari on May 19. Section 26(1c) of the act states that the source of money for the Vulnerable Group Fund includes “telecommunications tax, not less than one kobo per second of GSM calls”.The law defines the vulnerable group as children under five, pregnant women, the aged, physically and mentally challenged persons, and the indigent “as may be defined from time to time”. 

Global and Emerging Market Economic Updates

Inflation rate in the United Kingdom jumped in the last 12 months to 9% in April, up from 7% in March. On a monthly basis, the report said CPI rose by 2.5 percent in April 2022, compared with a rise of 0.6 percent in April 2021. According to the Office of the National Statistics (ONS), this is the highest recorded rate in the constructed historical series, which began in January 1989. The surge came as the UK’s cap on energy prices increased by £700-a-year in the previous month, driven by a record rise in global gas prices. It added that the price of food, transport, and machinery also pushed prices higher.

Rising food cost and increasing prices as a inflation

In the U.S, despite the high inflation environment, retail & food services sales rose by 0.9% from March 2022 to $677.7 billion in April 2022, falling slightly below the 1.0% estimate, but outpacing the amount recorded a year earlier. This implies consumers’ stiff spending amidst a general increase in the price level of energy, food, and services as well as other commodities. Furthermore, food services rose by 19.8% compared to last year’s data while gasoline stations and retail trade sales rose by 36.9% and 0.4%, respectively, compared to the same period last year.

Elsewhere, after weeks of lockdown in Shanghai to curb the spread of COVID-19, China has embarked on easing its lockdown in stages, hoping to return to normalcy by June. Nonetheless, given the shriveling economic impact of the lockdown on the economy, the People’s Bank of China (PBC) eased its Loan Prime Rate (LPR) from 3.7% & 4.6% to 3.7% & 4.45% for one year and above 5-year, respectively.

South Africa’s Central Bank on Thursday increased its main lending rate by the largest margin in more than six years as it stepped up efforts to fight inflation, sending the rand higher. The decision was in line with a Reuters poll published last week. The South African Reserve Bank’s (SARB’s) Monetary Policy Committee increased the repo rate by 50 basis points to 4.75%. The committee was split 4-1, with four members opting for the 50 bps hike and one preferring a 25 bps move. The rand hit a two-week high against the dollar after the decision was announced.