Global Economy
In Q2:2023, seasonally adjusted GDP increased by 0.10% QoQ in the Euro Area and was stable in the European Union (EU), according to Eurostat. In Q1:2023, GDP had increased by 0.10% QoQ in the euro area and by 0.20% QoQ in the EU. Furthermore, compared with Q2:2022, seasonally adjusted GDP increased by 0.50% YoY in the euro area and by 0.40% YoY in the EU in Q2:2023, after YoY increases of 1.10% in both zones in Q1:2023. Additionally, the number of employed persons increased by 0.20% in the Euro Area and by 0.10% in the EU in Q2:2023, compared with the previous quarter. In Q1:2023, employment had increased by 0.50% QOQ in the Euro Area and by 0.40% QOQ in the EU. Elsewhere, in Japan, according to official data, its economy grew by an annualised 4.80% in Q2:2023, revised downward from a preliminary estimate of 6.00% growth. The main factor behind the downgrade was a 1.00% drop in capital expenditure, compared with a preliminary flat reading. Private consumption, which makes up more than half of the economy, fell 0.60% QoQ in Q2:2023, compared with a preliminary 0.50% decline.
Domestic Economy
Yesterday, Nigeria Bureau of Statistics released data pertaining to the Company Income Tax (CIT) for Q2 2023. It showed that CIT surged 226.40% QoQ to NGN1.53trn in Q2:2023 (vs. NGN469.01bn in Q1:2023). Furthermore, Local CIT payments accounted for NGN1.02trn, while Foreign CIT Payment contributed NGN505.91bn in Q2:2023. Similarly, the National Bureau of Statistics (NBS) released the Foreign Trade in Goods statistics for Q2:2023. On a (QoQ) basis, Total Trade increased by 5.77% to NGN12.74trn (vs. NGN12.05trn in Q1:2023). This is due to the growth in both Total Imports (+2.99% QoQ) and Total Exports (+8.15% QoQ) to NGN5.73trn and NGN7.02trn respectively. However, we observed that Total Trade declined by 7.60% year-on-year (YoY) in Q2:2023 (vs. NGN13.79trn in Q2:2022). Consequently, Total Imports and Total Exports fell by 10.37% YoY and 5.20% YoY respectively in Q2:2023. Notably, Balance of Trade maintained its surplus streak for the third (3rd) consecutive quarter as it climbed by 39.1% QoQ to NGN1.29trn in Q2:2023 (vs. NGN927.16bn in Q1:2023). Overall, Balance of Trade settled at NGN2.22trn in H1:2023 compared to NGN618.81bn in H1:2022
Equities and Stock Recommendation
The Nigerian Equities Market ended the week on a positive note this week, as the NGX All Share Index (ASI) gained 91bps to 68,143.34 points. This is following gains in three (3) out of five (5) days of the trading week. Consequently, the market’s year-to-date returns settled at 32.96% (vs. 31.76% YtD last week). This week, Banking (+5.55%) and Consumer Goods (+2.24%) sectors closed bullish while Industrial (-0.49%), Oil and Gas (-0.12%) and Insurance (-2.94%) sectors witnessed bearish sentiments. The gains in the Banking sector is following the release of positive earnings reports by major players in the sector during the week. We opine that the positive momentum in the equities market this week is on the back of significant gains in BUAFOODS, ZENITHBANK and DANGSUGAR which offset losses recorded in DANGCEM, NESTLE and NB. Notably, OMATEK (+93.3% to NGN0.58), ABCTRANS (+66.2% to NGN1.13) and PRESTIGE (+58.6% to NGN0.46) were the top gainers for the week while LINKASSURE (-17.0% to NGN0.83), RTBRISCOE (-16.3% to NGN0.41) and JOHNHOLT (-14.4% to NGN1.31) topped the losers’ chart. In the coming week, we expect investors to maintain their focus on tickers with attractive dividend payouts.
Fixed Income
At the primary NTB auction held earlier this week, the average stop rate declined by 104bps to 8.02% (vs 9.05% at the previous auction). Similarly, the average bid-to-cover ratio fell by 101bps to settle at 4.08% (vs 5.09% at the previous auction), indicating decreased demand for the instruments. However, we observed improved demand for the 182-day bill, as its bid-to-cover ratio went up to 3.71x from 1.21x at the last auction. However, the Treasury Bills market closed the week on a bearish note as average yield edged up 37bps WoW to settle at 7.93%. Similarly, the secondary bond market ended the week bearish as average yield rose 11bps WoW to settle at 14.16%. This is following selloffs in the JUL-2034(+45bps), JUN-2033 (+24bps), APR-2049 (+23bps), JUL-2045 (+22bps), and JAN-2042 (+21bps) instruments. Overall, the Naira Fixed income market closed the week on a bearish note as average yield went up by 24bps WoW to settle at 11.05%.
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