Weekly Market Update

Weekly Commentary and Stock Recommendation: 9th October – 13th October 2023

October 13, 2023
Read Time: 3 minute(s)

Global Economy

In China, according to China’s Bureau of Statistics, the consumer price index (CPI) was flat YoY in September 2023 (vs. 0.1% YoY in August 2023), while it inched upward by 0.2% MoM in September 2023 (vs. 0.1% MoM in August 2023). The Statistics Bureau attributed the flatlining on a YoY basis to base effects, as there was a higher comparison base in the same period last year. YoY core inflation, excluding food and fuel prices, was 0.8%, unchanged from August 2023. Elsewhere, in the US, according to the US Bureau of Labor Statistics, the CPI increased by 0.4% MoM, with a 0.6% rise in rent accounting for more than half of the rise. Comparatively, the CPI soared 0.6% MoM in August 2023, which was the largest gain in 14 months. Shelter costs accounted for 0.3% in August 2023. YoY, the CPI recorded an uptick of 3.7% in September 2023 (unchanged from August 2023).

Domestic Economy

During the week, the Central Bank of Nigeria (CBN) in a press release, reaffirmed its dedication to enhancing liquidity in the Foreign Exchange (Forex) market. The banks six-point agenda includes promoting market-driven exchange rates, emphasizing reference to reliable platforms for rates, injecting liquidity into the Forex market when necessary, allowing importers of previously restricted items to purchase foreign exchange, clearing the existing Forex backlog and pursuing the goal of a unified Forex market through consultations with stakeholders. Furthermore, the National Bureau of Statistics (NBS) recently published its Capital Importation data for Q2:2023. On a year-on-year (YoY) basis, total capital imported dropped by 32.90% to settle at USD1.03bn in Q2:2023 (vs. USD1.16bn in) Q2:2022. This follows significant declines in two of its major components, Foreign Direct Investment (-41.54% YoY to USD86.03mn) and Foreign Portfolio Investment (-85.89% YoY to USD106.85). However, its third component, Other Investment (+32.73% YoY to USD837.34mn) increased in the period.

Equities and stock recommendation

This week, the Nigerian Equities market closed with positive sentiment as the market recorded gains in four (4) out of the five (5) trading sessions of the week. Consequently, the NGX ASI increased by 1.12% WoW to 67,200.69 points, while its year-to-date (YtD) returns settled at 31.12%, a surge from last week’s 29.66%. Notably, all sectors under our coverage garnered gains except for the Banking sector, which lost 78bps WoW. Specifically, the Industrial Goods (+5.03% WoW), Consumer Goods (+1.39% WoW), Oil and Gas (+0.33% WoW) and Insurance (+0.92% WoW) sectors closed positive. The top gainers for the week were ABCTRANS (+23.1% WoW to NGN0.80), CHIPLC (+12.7% WoW to NGN1.15) and BUACEMENT (+12.6% WoW to NGN105.80). On the flipside, PRESTIGE (-10.00% WoW to NGN0.45), ROYALEX (-9.6% WoW to NGN0.47) and PRESCO (-9.5% WoW to NGN182.00) topped the losers’ chart. We expect mixed sentiments in the coming week, as investors position themselves for dividends, pending the release of 9M:2023 earnings results.

Fixed Income

At the primary NTB auction held this week, the average stop rate declined by 163bps to 6.01% (vs 7.64% at the previous auction). However, the average bid-to-cover ratio surged by 434bps to settle at 8.78% (vs 4.44% at the previous auction), indicating an increase in demand. Notably, the 364-day bill instrument registered high demand as its average bid-to-cover ratio rose to 9.94x from 4.45x at the last auction. The bullish sentiment at the auction reflected on the Nigerian Treasury Bills market as average yield declined by 148bps WoW to settle at 6.52%. Conversely, the FGN bond market closed bearish as average yield went up by 4bps WoW to 14.46%. This is on the back of selloffs in the mid-end of the curve. Overall, the Naira Fixed income market closed bullish as average yield dipped by 72bps WoW to settle at 10.49%.

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