Equity:
The equity market traded on a bearish note following renewed fears of a second wave of the COVID-19 virus and the pessimistic outlook for the economy.
Month to date performance on the Nigerian Stock Exchange stood at -1.17% while year to date loss worsened to -6.96% as at 17thof June 2020.
The best performing sector over the month was the banking sector (+4.29%) while the worst performing sector was the oil and gas sector (-15.71%).
We expect the equity market to trade sideways in the near term in the absence of any positive catalyst however we would continue to take advantage of market opportunities to the enhance the value of the pension assets.
Fixed Income
The fixed income market traded on a bullish note with yields declining across the curve during the month of June. The bullish sentiment was largely supported by the buoyant system liquidity and the reduction in the monetary policy rate from 13.5% to 12.5%.
We expect yields to continue on a downward trajectory largely due to the healthy demand from local investors for federal government securities.
Oil Price
Oil prices improved marginally over the month of June, largely supported by the gradual pick-up in economic activity globally and the extension of the record production cuts by OPEC and its major allies. Brent crude increased by 5.8% to $40.55 per barrel over the period.
We expect oil prices to remain volatile due to rising concerns over the increase in COVID-19 infections in China and US and its impact on global oil demand.
Inflation
The headline rate of inflation for the month of May inched higher by 6bps to 12.40% YoY (April: 12.34% YoY). The increase was mostly driven by core inflation which rose by 14bps while food inflation increased by 1bp, largely due to the impact of currency depreciation and the effects of COVIDI-19 on transportation costs.
We expect these factors to keep inflation elevated in the near term and we expect inflation to average 12% over 2020.
Currency
The Naira remained stable over the period closing at N360/$1 and N386/$1 at the CBN window and IEFX window respectively while the Naira depreciated at the parallel market by 1.8% to N453/$1 due to currency pressures.
Furthermore, total FX inflows recorded over the month at the IEFX window printed at $172 million as the CBN is yet to resume FX sales in the IEFX window.
The FX reserves declined to $36.35 billion as at the 16th of June 2020 and we expect currency pressures to persist primarily due to the uncertain recovery of oil prices, COVID 19 pandemic and ability to attract foreign investors.
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