The NGX ASI closed the week in green after two consecutive negative performances in the previous weeks by 0.40% as it closed positive in 4 of the 5 trading sessions during the week. It increased on the back of buy pressures in large caps such as SEPLAT (+7.49%) and UCAP (+19.05%). Consequently, at 47,328.42 points, the equities market’s Year-to-Date return improved to 10.80% as market capitalisation rose by 0.39% to close at N25.51 trillion.
Market breadth (a measure of investor sentiment) increased in the previous week, increasing from 1.13x to 2.00x as 44 stocks appreciated against 22 stocks that declined. RTBRISCOE and NIGERINS topped the market gainers with 56.67% and 40.00% WoW respectively, while ELLAHLAKES and JULI were the top losers with declines of 9.88% and 9.76% respectively WoW.
The activity level weakened as the trade volume and value declined by 2.46% and 37.00% WoW. A total turnover of 1.668 billion shares worth N19.481 billion in 25,979 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities by volume namely TRANSCORP, UCAP, and ZENITHBANK. They accounted for 491.673 million shares worth N5.411 billion in 4,277 deals; contributing 29.48% and 27.78% 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 relatively bullish sentiment in the bond market as three of the five tenor yields under coverage closed lower, the 10-Year yield increased by 70bps while the 1-Year closed flat at 3.89%. The 3, 5, and 30-Year tenor bond yields compressed by 5bps, 39bps, and 17bps respectively
There was mixed sentiment in the Nigerian Treasury Bills Market as the 182-day paper yield compressed by 108bps to close at 3.56% while the 90 and 364-day paper yields closed flat at 3.15% and 5.20% respectively WoW.
In the Money Market space, the Open Repo (OPR) and Overnight (O/N) rates increased to 14.75% and 15.00% from 13.00% and 14.00% 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.
Local Economic Updates
Last week, the NBS released the Company Income Tax (CIT) report for Q4’21; it revealed that the CIT totaled N347.81bn (local payments stood at N258.85bn while the foreign payments accounted for N88.96bn), reflecting a decline of 26.39% relative to Q3’21 levels. However, the aggregate CIT payment for 2021 was N1.69trn, reflecting a growth of 19.86% and 3.68% compared to 2020 and 2019, respectively.
Also, the prices of rice, beans, tomatoes, pepper, amongst other staple food items, recorded significant increases across major markets in Lagos State, as traders lament the sudden rise in transport costs. Notably, a 50kg bag of foreign rice increased by 17.58% to sell for an average of N 32,775 compared to N 27,875 recorded in the previous month. Also, the price of a big bag of white beans initially sold for an average of N 47,875 now sells for an average of N 50,250.
In a recently released circular titled, “OPERATING GUIDELINES FOR RT200 NON-OIL EXPORT PROCEEDS REPATRIATION REBATE SCHEME”, the Central Bank of Nigeria issued guidelines for the RT200 rebate scheme, which entails the apex bank paying N65 for every US$1 repatriated and sold at the Investors and Exporters (I&E) Window to Authorised Dealer Banks (ADBs) for other thirty party use and N35 for every US$1 repatriated and sold into I&E for own use on eligible transactions. According to the CBN, this is a means to reduce exposure to volatile sources of foreign exchange and earn more stable and sustainable inflows of FX.
Elsewhere, the Federal Government has said that it will intensify efforts to encourage crude oil production to take advantage of the global oil prices, hitting full production by the end of the year. The move is coming when the global crude oil price hit over $100 per barrel following the Russia-Ukraine tension. Recall that in a recent interview, the Nigerian Minister of State for Petroleum bemoaned that the federal government is unhappy with the rising crude prices as Nigeria is still a net exporter of petroleum products.
Global and Emerging Market Economic Updates
The global market was engulfed by escalating tensions on the Eastern European front, as expectations of a Russian invasion of Ukraine materialized during the week. Elsewhere, the West and its allies relied on aggressive economic sanctions as a means of punishing Russia for its full-scale invasion of a sovereign nation.
For context, the United States President, Joe Biden, announced new sanctions on the Russian government, which he says will stunt Russia’s ability to finance its military and compete in a 21st-century high-tech world. He said this in a press briefing late Thursday evening after a meeting with G7 leaders. The U.S. President stated that the sanctions are to maximise the long-term impact on Russia’s economy.
While the invasion of Ukraine has left the economy unhinged, crippled by crumbling infrastructure and rising causalities, the global financial market also shared in the turbulence, with risky asset classes like equities and digital currencies plummeting for most of the week before attempting a late rebound. However, these assets welcomed interests last week as investors sought protection from the turbulent market atmosphere for safe havens like gold and U.S. Treasuries. Also, on the energy front, fears of disruption of Russian supply of gas and crude to Europe caused oil prices to soar, propelling Brent futures above US$100 per barrel for the first time since 2014.
In the oil market, Brent crude price surged week on week as Western allies imposed more sanctions on Russia and blocked some Russian banks from a global payments system (SWIFT), which could cause severe disruption to its oil exports.