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Research

Weekly Market News for Investors in Nigeria

NGX ASI Closed the Week Positive with 3.8% Increase in Market Capitalization.

The NGX ASI closed the week in green by 3.38% as it closed positive in 4 of the 5 trading sessions during the week as a result of buy pressures in bellwether stocks such as AIRTELAFRI (+10.00%) and SEPLAT (+9.43%). Consequently, at 45,957.35 points, the equities market’s Year-to-Date return improved to 14.12% as market capitalization increased by 3.38% to close at N24.67 trillion.

Market breadth (a measure of investor sentiment) strengthened last week, rising from 0.94x to 2.04x as 47 stocks appreciated against 23 stocks that declined. COURTVILLE and NNFM topped the market gainers with 24.32% and 20.61% WoW respectively, while both VERITASKAP and REGENCY were the top laggers with declines of 8.70%WoW.

The activity level strengthened as the trade volume and value increased by 16.13% and 45.15% respectively WoW. A total turnover of 1.86 million shares worth N47.49 billion in 20,861 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities by volume were CWG, TRANSCORP and FBNH. They accounted for 810.748 million shares worth N2.08 billion in 1,499 deals; contributing 43.65% and 4.38% to the total equity turnover volume and value respectively.

Outlook for the week

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

The Nigerian Fixed Income

There was a negative sentiment in the global market as all the six (6) indices under coverage closed in red WoW. Similarly, the African Market closed in red as 3 of the 4 indices under coverage closed negative. The Nigerian NGX, the only gainer, improved 3.38% WoW respectively.

Outlook for the week

Market activity would likely be dictated by bargain hunting sentiment in the near term.

Local Economic Updates

Based on the NBS Inflation Report released last week, the Consumer Price Index (CPI) measures inflation rose by 15.63% Year-on-Year (YoY) in Dec’21. This is 0.23% higher than the rate recorded in Nov’21 (15.40%) but 0.13% lower than the rate recorded in Dec’20 (15.75%). The uptick in headline inflation essentially ends the eight consecutive decelerations. The increase was on the back of the price acceleration in the food and core subindices.

Also, on a month-on-month (MoM) basis, the Headline Index increased by 1.82% in Dec’21; this is 0.74% higher than the rate (1.08%) recorded in the previous month. The sharp increase in monthly headline inflation resulted from the upsurge in prices of staple food items relative to the preceding month.

Despite the reversal in the inflation trend, we expect the impact of the base effect to resume in the first quarter of the year, but beyond this period, the outcome would likely become immaterial. In addition to the wane of the base effect, the subpar planting season in 2021 should start to adversely impact food prices as we move further into the year, alongside elevated energy prices being an upside risk to inflation in 2022.

Elsewhere, the Nigeria House of Senate passed a bill to establish the National Rice Development Council, targeted toward further improvement of local production of rice in a bid to curtail annual importation of rice, which is currently valued at $2.0bn, as well as to improve FX earnings. In addition, at the unveiling of 13 rice pyramids in Abuja, the CBN governor disclosed that Nigeria’s rice production rose 66.7% in six (6) years, from 5.4MT in FY’15 to 9.0 MT in FY’21.

Global and Emerging Market Economic Updates

In the past week, the U.S. initial claims for unemployment insurance rose faster than the expected 225,000 new filings, at 286,000 for the week to Jan 15. Likewise, continuing claims surged by 84,000 to 1.64 million, adding to concerns around an omicron dented employment picture. Nonetheless, the four-week moving average for continuing claims, which helps reduce weekly volatility, improved in the review week, falling by 55,250 to 1.664 million.

Elsewhere, in line with the similar trend of rising inflation in the U.S., the latest report from the United Kingdom revealed that inflation surged to a 30-year high of 5.4% in Dec’21. This is higher than the 5.1% figure printed in Nov’21 and 5.2% Economist expectations. Similarly, on a MoM basis, the headline inflation rose by 0.5%, also outperforming market expectations of 0.3%.  

With the soaring cost of living, which may not be unconnected to elevated energy prices, surging demands, and supply chain bottlenecks, the next MPC slated for 3rd Feb’22 and the reaction of the Bank of England may likely be to raise interest rates further, having increased it during its last policy meeting in Dec’21 to 0.25% from 0.1% as it struggles to meet its 2% inflation rate target.

In the oil market, the rally continued last week as the price of Brent Crude hit $87.08/barrel amid increasing demand as the fear of Omicron wanes and concerns on imminent supply shortage rose due to the attack on United Arab Emirates oil facilities by Yemen’s Houthi Group.

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