The Local Bourse rebounded from its negatory territory as it increased by 0.70% WoW, despite closing negative in three of the five trading sessions during the week. It improved on the back of buying pressures in large caps such PZ (+20.59%) and ETERNA (+15.32%). Consequently, at 50,722.33 points, the equities market’s Year-to-Date return increased to 18.74% as market capitalisation increased by 0.74% to close at
Market breadth (a measure of investor sentiment) strengthened in the just concluded week, improving from 0.21x to 1.86x as 41 stocks appreciated against 22 stocks that declined. JAPAULGOLD and HONYFLOUR topped the market gainers with 47.83% and 36.10% respectively WoW, while MCNICHOLS and LEARNAFRCA were the top losers with declines of 18.68% and 15.38% respectively WoW.
The activity level weakened as the total trade volume and value declined by 54.33% and 21.11% WoW. A total turnover of 705.636 million shares worth N12.850 billion in 22,124 deals was traded this week by investors on the floor of the Exchange. Trading in the top three equities namely Guaranty Trust Holding Company Plc, Zenith Bank Plc and FBN Holdings Plc (measured by volume) accounted for 173.852 million shares worth N3.073 billion in 4,324 deals, contributing 24.64% and 23.91% to the total equity turnover volume and value respectively.
We expect positive sentiment to persist in the next trading session as the equities market still presents decent opportunities for investors chasing positive real returns
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 30-Year bond compressed by 9bps. The yields on the 3, 5 and 10-Year bonds increased by 18ps, 10bps and 25bps respectively WoW.
The Nigerian Treasury Bills Market closed bullish as the 91 and 182-day papers compressed by 1bp and 1bp respectively, while the 364-day paper yield inched higher by 46bps to close at 6.82% WoW.
In the Money Market space, while the Open Repo (OPR) rate declined by 0.25% to close at 14.50% while 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.
Global and Emerging Market Economic Updates
Last week, the Nigerian National Petroleum Company (NNPC) Limited reports that in H1’22, a total of $2.7 billion was remitted into its account with the Central Bank of Nigeria (CBN). This disputes the CBN governor’s earlier assertion that the NNPC’s failure to remit funds contributed to the weakening value of the naira in Nigeria’s reserves by the NNPC. Although, the position of the CBN can be understood as the remittance of $2.7bn pales compared to what was usually being remitted to the CBN.
Also, out of the $2.7bn remitted into the CBN account, $645mn was for dividend payments paid by the Nigerian Liquefied Natural Gas company Limited (NLNG). In comparison, the balance of $1.8bn was gotten from the operational activities of the national oil company, which recently transited into a limited liability company.
Timipre Sylva, the Minister of State for Petroleum Resources, claimed that fuel marketers, not the FG, were responsible for the most recent hike in the price of PMS. He reiterated that the FG has not deregulated the downstream oil and gas sector. This suggests that the upward increase was primarily made to allay the oil marketers’ worries about the incessant fuel scarcity.
Elsewhere, in an effort to increase the price of each tonne of cocoa exported from Nigeria by an additional $400.0, the Federal Government has started working with the Cocoa Farmers Association of Nigeria. Notably, Nigeria sells about 340,000 tonnes of cocoa each year. This implies that the nation will make an extra $136.0 million in revenue in addition to the actual cost of the commodity.
The National Pension Commission (PenCom) reported that in H1’22, assets under the Contributory Pension Scheme increased by 6.3 percent to N14.3 trillion. The data also revealed that N9.0 trillion of the total assets were invested in government securities (such as bonds and treasury bills). The remaining funds were spread among local and overseas shares and corporate debt instruments.
Global and Emerging Market Economic Updates
Nancy Pelosi, the speaker of the U.S. House, visited Taiwan in person after new indications of impending hostilities between China and Taiwan, despite Chinese attempts to prevent her. The visitation, unrelated to her address in Taipei, was intended to strengthen U.S. ties with Taiwanese citizens while also supporting the democratic rights of the island nation’s citizens. Provoking Taiwan’s boundaries with a 4-day military exercise, China’s PLA also imposed an unannounced sanction against Nancy Pelosi and halted trades with Taiwan.
Last week, the Institute for Supply Management updated the July Manufacturing and Services PMI for the United States. While the services PMI grew by 1.4 points to 56.7 in July, the manufacturing PMI slowed down by 0.2 points from 52.8 in June. These outcomes demonstrated rising demand and economic activity in the U.S., particularly in the services sector, significantly contributed to those activities. Hence, following the second quarterly drop seen in Q2’22, these PMI data assisted in reducing concerns about an economic recession in the U.S.
The Labor Department announced initial unemployment claims of 260,000 for the week ending July 30; this was the highest level since November 2021 and in line with consensus predictions. In terms of the U.S. labor market, the Non-Farm Payroll report revealed that 528,000 jobs were gained in July, above the previous month’s numbers and exceeding estimates by 250,000.The unemployment rate printed at 3.5 percent, lower than the 3.6% estimate.
Elsewhere, the Bank of England (BoE) projected the U.K.’s most prolonged recession since the global financial crisis and increased interest rates by 50 basis points, their most significant increase since 1995. Borrowing costs have increased for the sixth time consecutively to 1.75 percent. Additionally, the bank anticipates that headline inflation will reach a peak of 13.3 percent on October 22 and remain high through much of 2023 before plummeting to its 2% target in 2025.