Bearish sentiment persists in the local bourse as the NGX ASI declined by 0.44% WoW, closing negative in 4 of the 5 trading sessions. It fell on significant decreases in high-value stocks such as BETAGLASS (-9.96%) and UACN (-6.82%). Consequently, at 49,475.42 points, the equities market’s Year-to-Date return decreased to 15.82% as market capitalisation declined by 0.43% to close at N26.69 trillion.
Market breadth (a measure of investor sentiment) weakened in the just concluded week, falling from 0.61x to 0.33x as 39 stocks depreciated against 13 stocks that appreciated. MULTIVERSE and ABCTRANS topped the market gainers with 18.64% and 7.14% WoW, respectively, while REDSTAREX and BETAGLASS were the top losers, with declines of 12.59% and 9.96%, respectively WoW.
The activity level weakened as the total trade volume and value declined by 24.26% and 14.20% WoW, respectively. A total turnover of 719.398 million shares worth N8.004 billion in 17,444 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities, namely Courteville Business Solutions Plc, Zenith Bank Plc, and Access Holdings Plc (measured by volume), accounted for 278.293 million shares worth N1.984 billion in 3,038 deals, contributing 38.68% and 24.78% 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 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, and the 10 and 30-Year tenor yields closed flat respectively. The yields on the 3 and 5-Year bonds compressed by 45bps and 21bps respectively WoW.
There was bullish sentiment in the Nigerian Treasury Bills Market as the 91 and 364-day paper yields compressed by 3bps and 1bp respectively WoW while the 182-day yield closed higher by 133bps.
In the Money Market space, the Open Repo (OPR) and Overnight (O/N) rates increased to 9.67% and 10.17% from 8.50% and 9.00% 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.
Given the increase in the food and energy prices on a YoY basis during the study period, the CPI figure for August 2022 revealed that Nigeria continues to be negatively impacted by the war in Eastern Europe and unmanaged legacy inflation drivers. Compared to July’s 19.64%, headline inflation came in at 20.52% y/y, which is 0.88% higher. Food inflation, meanwhile, increased by 1.10% from July’s 22.02% to 23.12%. When volatile food items are excluded, core inflation came in at 17.20%, which is 0.94% higher than the 16.26% recorded in July.
Nigeria’s crude oil production fell by 10.3% to 972,000 bpd in August 2022 from 1,083,899 bpd in July 2022, according to the Organization of Petroleum Exporting Countries (OPEC). As a result, Angola and Libya produced more crude oil than Nigeria during the reviewed month, with outputs of 1.2mbpd and 1.1mbpd, respectively.
Based on the Company Income Tax (CIT) report for Q2’22 released last week by the National Bureau of Statistics (NBS), the report shows that the CIT printed at N714.4 billion during the review period, up 51.3% from Q2 2021 and 29.5% from the previous quarter.
Elsewhere, over 400 out of the 541 Federal Government Ministries, Departments, and Agencies will be eliminated, according to the recommendations of the Presidential Committee on Agencies Rationalisation, which is directed by Stephen Orosanye. The Federal Government’s primary concern in making this decision was revenue generation.
The U.S. Fed will have much to think about before its FOMC meeting on Wednesday because recent economic data suggests that consumer prices may still be out of control despite the Fed’s efforts to control them. From July’s 8.5%, inflation decreased to 8.3% in August. Despite being the lowest annualized inflation rate in four months, the consumer price index (CPI), which gauges inflation by looking at the prices of a wide range of items, grew by 0.1% in August after registering flat in July and defying market forecasts of a 0.1% decline.
The price rises in food and housing offset the considerable declines in energy prices in August, causing the increase. As a result of the above, the U.S. Fed would likely consider another big rate hike at the next FOMC meeting to rein in inflation.
In August 2022, the UK’s CPI decreased for the first time in almost a year as a decrease in gasoline prices provided individuals and the Bank of England with some unexpected and perhaps fleeting relief (BoE). The annual CPI rise decreased from a 40-year high of 10.1% in July to 9.9%. However, economists cautioned that inflation would peak at around 11% in Oct’22 when a new household energy tariff begins. It might be slow to decline afterwards due to underlying pressures and new government fiscal stimulus.
Elsewhere, Ghana’s consumer prices increased by 33.9% y/y in August, which is the highest rate since 2001, up from 31.7% y/y in July, according to the Ghana Statistical Service. Also, consumer prices increased 1.9% m/m compared to 3.1% in July, primarily due to high energy prices.