Mon - Fri : 08:00am - 5:00pm
info@pfi-ltd.com
+234 701 313 9693

Research

Nigerian Stock Exchange

The Nigerian Equities Market

The Nigerian Domestic Bourse declined further by 3.10% WoW, closing negative in four of the five trading sessions of the week. It fell on the back of selling pressures in large caps such MTNN (-12.62%) and PZ (-18.27%). Consequently, at 50,370.25 points, the equities market’s Year-to-Date return decreased to 17.92% as market capitalisation declined by 3.11% to close at N27.16 trillion.

Market breadth (a measure of investor sentiment) weakened in the just concluded week, declining from 0.53x to 0.21x as 11 stocks appreciated against 53 stocks that declined. NAHCO and UBN topped the market gainers with 9.09% and 7.84% respectively WoW, while PZ and WEMABANK were the top losers with declines of  18.27% and 17.54% respectively WoW.

The activity level strengthened as the total trade volume and value improved by 68.59% and 10.04% WoW. A total turnover of 1.546 billion shares worth N16.289 billion in 23,873 deals was traded this week by investors on the floor of the Exchange. Trading in the top three equities namely International Energy Insurance Plc, Transcorp Hotels Plc and Zenith Bank Plc (measured by volume) accounted for 798.900 million shares worth N2.602 billion in 3,110 deals, contributing 51.69% and 15.98% to the total equity turnover volume and value respectively.

We expect positive sentiment to return in the next trading session 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 bearish sentiment in the bond market as three of the four tenor yields under coverage closed higher while the yield on the 3-Year bond compressed by 3bps. The yields on the 5, 10 and 30-Year bonds increased by 35bps, 16bps and 34bps respectively WoW.

The Nigerian Treasury Bills Market closed bullish as the 91, 182 and 364-day paper yields compressed by 310bps, 81bps and 1bp to close at 6.09%, 7.79% and 6.36% respectively WoW.

In the Money Market space, while the Open Repo (OPR) rate declined by 0.08% to close at 14.75%, the Overnight (O/N) rate closed flat at 15.00%.

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, a statement from the office of the Senate President, the Senate set out a plan to summon the Governor of the CBN, Godwin Emefiele, to explain the rapid depreciation of the naira last week. Also, the impeachment move against President Buhari by the Senate over his failure to address the continued insecurity challenges in the country with kidnapping, massive killing, and wanton destruction of property across the country gained momentum last week as PDP House of Rep members have thrown their weight behind the upper chamber.

The Federal Government (FG) announced through the Minister of Agriculture and Rural Development, Abubakar Mahmood, that it had approved a ban on the direct purchase of agricultural produce from local farmers by foreign merchants. The ban was implemented to protect the interests of local farmers.

The Premium Breadmakers Association of Nigeria (PBAN) suspended its 4-day strike last week. It resolved to increase its bread price by 10.0%, and master bakers increased their price by 20.0%. The strike followed the Federal Government’s (FG)15.0% wheat development levy, NAFDAC’s N154,000 penalty charge on late renewal of certificates, and the inability of its members to access the CBN’s grants and soft loans.

A lot of bread prepare to move on in the shelf. Bread bakery food factory production with fresh products. Automated production of bakery products.

The Lagos Commodities and Futures Exchange was licensed by the Securities and Exchange Commission (SEC) to trade gold with the London Bullion Market Association’s 99.99% purity specification, targeting globally acceptable pricing and quality, started trading in gold ahead of its official launch.

The International Monetary Fund (IMF) released its World Economic Outlook report last week. In the report, the IMF retained its 3.4% growth projection for Nigeria in 2022 but raised its growth projections for 2023 by 0.1ppt to 3.2%.

Global and Emerging Market Economic Updates

In line with the market expectation, the US Fed increased interest rates by 75bps, pushing the federal funds rate to a range of 2.25%-2.50%. Fed’s Chair, Jerome  Powell, cited the Committee’s intention to consider more aggressive rate hikes in subsequent meetings if the unfolding economic data were necessitated. Despite the 75bps rate hike, the global market closed positive on impressive earnings reports from large names like AMAZON and GOOGLE. Also, the US 10-year Treasury fell to 2.642% during the week, while the S&P 500 and NASDAQ composite closed in positive territory for the second straight week.

Ahead of the release of the US Q2 GDP result, Powell described a recessionary phase as a broad-based decline across many industries for a couple of months and thereby talked off the US economy from a recession. In addition, he mentioned the strong labour market, which signals strength in the economy, despite the possibility of a negative Q2’2022 GDP report. Going further into the week, the US Q2 GDP report showed a 0.9% y/y decline in growth, depicting a “technical recession,” as described by the US Fed.

European Union

Elsewhere, it appears that the European Union is still reaping the benefits of reopening its economy after suffering from a covid-induced recession, as Q2 GDP results printed at a 0.7% annualized growth rate after recording an initial growth of 0.5% in Q1. Furthermore, inflationary pressures in the Eurozone are set to worsen as Russian gas giant – Gazprom reduces gas flows through the Nord Stream 1 pipeline to 20% of its usual capacity, even as the bloc approaches its winter season.

As economies around the globe battle with the prospects of an inevitable policy tightening, the IMF has reviewed its outlook for the global economy to reflect the gloomy and uncertain fallouts from the war in Ukraine. The Washington-based organisation forecasts the global GDP growth at 3.2% this year before slowing to 2.9% in 2023. These revisions mark a tone-down of 0.4 and 0.7 percentage points, respectively, from April’s projections.

Click here to download the report