Weekly Market Update

Weekly Commentary: 15th January – 19th January 2024

January 19, 2024
Read Time: 4 minute(s)

Global Economy

Earlier this week, China released its Q4:2023 GDP figures. According to the data, Gross domestic product (GDP) grew 5.2% YoY in Q4:2023 (vs. 4.9% in Q3:2023). On a QoQ basis, however, GDP grew by 1.0% in Q4:2023, slowing from a revised 1.5% gain in the previous quarter. Elsewhere, in the UK, the Office of National Statistics released December 2023 Consumer Price Index (CPI) data. Headline CPI rose by 4.0% YoY in December 2023, up from 3.9% YoY in November 2023, and the first time the rate has increased since February 2023. On a MoM basis, CPI rose by 0.4% in December 2023, the same rate as in December 2022. Core CPI (excluding energy, food, alcohol, and tobacco) rose by 5.1% YoY in December 2023, the same rate as in November 2023. Finally, in the US, Retail sales rose 0.6% MoM in December 2023 after an unrevised 0.3% MoM gain in November 2023, according to the Commerce Department’s Census Bureau. Retail Sales increased 5.6% on a YoY basis in December 2023.

Domestic Economy

Earlier this week, the National Bureau of Statistics (NBS) published the Consumer Price Index (CPI) report for December 2023, revealing a 72bps surge in headline inflation to 28.92% Year-on-Year (YoY), compared to 28.20% YoY in November 2023. This surge was influenced by higher sub-component values, with food inflation rising by 109bps to 33.93% YoY and core Inflation increasing by 68bps to 23.06% YoY. On a Month-on-Month (MoM) basis, headline inflation experienced a 20bps uptick, reaching 2.29% MoM (vs 2.09% MoM in November 2023), driven by elevated values in both food inflation (+30bps to 2.72% MoM) and core inflation (+29bps to 1.82% MoM). Furthermore, The Central Bank of Nigeria (CBN) has disbursed around USD2bn in efforts to address the outstanding foreign exchange liabilities across diverse sectors such as manufacturing, aviation, and petroleum Additionally, the apex bank has successfully resolved the entire liability of 14 banks and initiated settlements with foreign airlines.

Equities and stock recommendation

This week marked another record-breaking week at the Nigerian Equities market, as the NGX All Share Index (ASI) crossed 91,000 points, after five (5) consecutive trading days of bullish returns. Consequently, on a Week-on-Week (WoW) basis, the market gained 13.84% to settle at 94,538.12 points, bringing its year-to-date (YtD) returns up to 26.43% (vs. last week: 11.06% YtD). The remarkable gains in the market this week is on the back of bargain-hunting activities in tickers such as DANGCEM (+53.94% WoW), BUACEM (+44.88% WoW), BUAFOODS (+9.09% WoW), TRANSCORP (+39.18% WoW) and GEREGU (+17.72% WoW). This week, the Industrial Goods sector (+46.88% WoW) led sectoral gains, followed by the Insurance (+14.94% WoW), Oil and Gas (+8.82% WoW), Consumer Goods (+8.18% WoW) sectors. However, the Banking sector (-0.12% WoW) closed in the red, dragged down by STANBIC (-4.41% WoW), FBNH (-3.45% WoW) and GTCO (-2.00% WoW). The top gainers this week were DANGCEM (+53.9% WoW to NGN538.80), HONEYFLOUR (+50.8% WoW to NGN5.85) and MAYBAKER (+50.5% WoW to NGN8.26). On the flipside, ROYALEX (-22.4% WoW to NGN0.76), IKEJAHOTEL (-10.6% WoW to NGN7.70) and LINKASSURE (-8.2% WoW to NGN1.35). In the coming week, we expect bullish sentiment in the market to persist as investors position themselves in dividend-paying tickers ahead of the release of the 2023FY earnings results.

Fixed Income

At the Open Market Operation (OMO) auction held this week, the average stop rate declined by 42bps to 13.67% (vs 14.08% at the last auction). Conversely, the average bid-to-cover ratio rose by 35bps to 1.73x, up from 1.38x at the previous auction, indicating an increase in demand notably in the 365-day instrument (+88bps to 3.26x). The Nigerian Treasury Bills market closed the week on a bearish note as the average yield went up by 11bps WoW to 3.93%. Similarly, the FGN Bond market concluded bearish as the average yield rose 27bps WoW to close at 13.56%. This was driven by sell-offs across the yield curve. Overall, the Naira Fixed Income market closed the week negatively, with the average yield climbing by 19bps to settle at 8.47%. We expect bearish sentiment in the coming week, driven by the CBN efforts toward reducing liquidity.

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