Global Economy
According to the Office of National Statistics, the UK’s Consumer Prices Index (CPI) rose by 2.0% YoY in June 2024, unchanged from May 2024. On a MoM basis, CPI rose by 0.1% in June 2024, the same rate as in June 2023. Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.5% YoY in June 2024, the same rate as in May 2024. Also, this week, the European Central Bank decided to keep its three key interest rates unchanged. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.25%, 4.50% and 3.75% respectively. Finally, in China, according to the Chinese National Bureau of Statistics, China’s economy grew 4.7% YoY in Q2:2024, compared to a 5.3% YoY expansion in Q1:2024. On a quarterly basis, the Chinese Gross Domestic Product (GDP) rate rose 0.7% QoQ in Q2:2024 vs. 1.5% QOQ registered in the previous quarter.
Domestic Economy
Earlier this week, the National Bureau of Statistics (NBS) reported that Nigeria’s headline inflation rate increased for the eighteenth (18th) consecutive month, rising by 24bps to 34.19% year-on-year (YoY) in June 2024, up from 33.95% in May. This surge was driven by higher food inflation (+21bps to 40.87% YoY) and core inflation (+36bps to 27.40% YoY). On a month-on-month (MoM) basis, inflation rose by 17bps to 2.31%, ending a three-month decline. This was driven by higher food prices (+26bps to 2.55% MoM) and core inflation (+5bps to 2.06% MoM). These increases underscore the persistent challenges in managing inflationary pressures, which continue to impact the cost of living and economic stability in the country, Elsewhere, the federal government is considering implementing a windfall tax on banks, set at 50% of the profit banks realized from foreign exchange revaluation in 2023. The revenues from this proposed tax are intended to be allocated to “Renewed Hope” projects, which include infrastructure, education, and healthcare. These steps are part of broader fiscal policy adjustments and revenue generation strategies being pursued by the government.
Equities and stock recommendation
This week, the Nigerian equities market closed positive as the NGX All Share Index (NGX ASI) gained 0.87% WoW to print at 100,539.40 points. This pushed the market’s year-to-date (YtD) returns up to 34.46% (vs. last week: 33.30% YtD). However, on a sectoral basis, only the Industrial Goods (+0.08% WoW) closed positive, spurred by gains in WAPCO (+1.10% WoW to NGN36.00). Other sectors such as Insurance (-4.86% WoW), Consumer Goods (-0.20% WoW), Oil and Gas (-0.10% WoW) and Banking (-0.05% WoW) ended the week on a negative note, following selloffs in VERITASKAP (-11.67% WoW to NGN1.06), DANGSUGAR (-2.76% WoW to NGN40.45) and WEMABANK (-5.26% WoW to NGN6.30) respectively. Top gainers for the week were AFRIPUD (+33.8% WoW to NGN9.90), CUTIX (+29.7% WoW to NGN5.99), CHAMPION (+12.1% WoW to NGN3.42) while the top losers were LINKASSURE (-24.6% WoW to NGN0.86), NGXGROUP (-8.4% WoW to NGN21.35) and FTNCOCOA (-6.4% WoW to NGN1.61). Next week, we believe that investors’ attention would be fixed on the outcome of the upcoming MPC meeting to be held on the 22nd and 23rd of July 2024 and this would direct the market’s performance. Furthermore, we expect market performance to be impacted by the trickling in of Q2:2024 earnings results, as investors position themselves in high-dividend paying tickers with strong fundamentals..
Fixed Income
This week, the Nigerian Secondary fixed income market extended its bearish run for the 7th week consecutively. In the Treasury bills market, the average yield climbed 156bps WoW to close at 24.89%. This is following higher yields across the tenor bills. Likewise, the FGN bond market closed bearish with the average yield up by 11bps WoW to 19.37%. This rise is on the back of selloff across the yield curve, significantly in the MAR-2025 (+76bps), JUN-2033 (+80bps) and FEB-2034 (+127bps). Overall, the Naira fixed income market ended on a bearish note as the average yield increased by 84bps WoW to 22.13%. In the coming week, we expect the FGN Bond auction and primary market auctions repayment to influence the market, but yields are likely to remain high in the fixed income market space.
Please click the links to access our weekly stock recommendation and full report.
• Stock Recommendation
• Full report
Best regards,
ARM Research
Weekly Commentary and Stock Recommendation: 15th July – 19th July 2024
Global Economy
According to the Office of National Statistics, the UK’s Consumer Prices Index (CPI) rose by 2.0% YoY in June 2024, unchanged from May 2024. On a MoM basis, CPI rose by 0.1% in June 2024, the same rate as in June 2023. Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.5% YoY in June 2024, the same rate as in May 2024. Also, this week, the European Central Bank decided to keep its three key interest rates unchanged. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.25%, 4.50% and 3.75% respectively. Finally, in China, according to the Chinese National Bureau of Statistics, China’s economy grew 4.7% YoY in Q2:2024, compared to a 5.3% YoY expansion in Q1:2024. On a quarterly basis, the Chinese Gross Domestic Product (GDP) rate rose 0.7% QoQ in Q2:2024 vs. 1.5% QOQ registered in the previous quarter.
Domestic Economy
Earlier this week, the National Bureau of Statistics (NBS) reported that Nigeria’s headline inflation rate increased for the eighteenth (18th) consecutive month, rising by 24bps to 34.19% year-on-year (YoY) in June 2024, up from 33.95% in May. This surge was driven by higher food inflation (+21bps to 40.87% YoY) and core inflation (+36bps to 27.40% YoY). On a month-on-month (MoM) basis, inflation rose by 17bps to 2.31%, ending a three-month decline. This was driven by higher food prices (+26bps to 2.55% MoM) and core inflation (+5bps to 2.06% MoM). These increases underscore the persistent challenges in managing inflationary pressures, which continue to impact the cost of living and economic stability in the country, Elsewhere, the federal government is considering implementing a windfall tax on banks, set at 50% of the profit banks realized from foreign exchange revaluation in 2023. The revenues from this proposed tax are intended to be allocated to “Renewed Hope” projects, which include infrastructure, education, and healthcare. These steps are part of broader fiscal policy adjustments and revenue generation strategies being pursued by the government.
Equities and stock recommendation
This week, the Nigerian equities market closed positive as the NGX All Share Index (NGX ASI) gained 0.87% WoW to print at 100,539.40 points. This pushed the market’s year-to-date (YtD) returns up to 34.46% (vs. last week: 33.30% YtD). However, on a sectoral basis, only the Industrial Goods (+0.08% WoW) closed positive, spurred by gains in WAPCO (+1.10% WoW to NGN36.00). Other sectors such as Insurance (-4.86% WoW), Consumer Goods (-0.20% WoW), Oil and Gas (-0.10% WoW) and Banking (-0.05% WoW) ended the week on a negative note, following selloffs in VERITASKAP (-11.67% WoW to NGN1.06), DANGSUGAR (-2.76% WoW to NGN40.45) and WEMABANK (-5.26% WoW to NGN6.30) respectively. Top gainers for the week were AFRIPUD (+33.8% WoW to NGN9.90), CUTIX (+29.7% WoW to NGN5.99), CHAMPION (+12.1% WoW to NGN3.42) while the top losers were LINKASSURE (-24.6% WoW to NGN0.86), NGXGROUP (-8.4% WoW to NGN21.35) and FTNCOCOA (-6.4% WoW to NGN1.61). Next week, we believe that investors’ attention would be fixed on the outcome of the upcoming MPC meeting to be held on the 22nd and 23rd of July 2024 and this would direct the market’s performance. Furthermore, we expect market performance to be impacted by the trickling in of Q2:2024 earnings results, as investors position themselves in high-dividend paying tickers with strong fundamentals..
Fixed Income
This week, the Nigerian Secondary fixed income market extended its bearish run for the 7th week consecutively. In the Treasury bills market, the average yield climbed 156bps WoW to close at 24.89%. This is following higher yields across the tenor bills. Likewise, the FGN bond market closed bearish with the average yield up by 11bps WoW to 19.37%. This rise is on the back of selloff across the yield curve, significantly in the MAR-2025 (+76bps), JUN-2033 (+80bps) and FEB-2034 (+127bps). Overall, the Naira fixed income market ended on a bearish note as the average yield increased by 84bps WoW to 22.13%. In the coming week, we expect the FGN Bond auction and primary market auctions repayment to influence the market, but yields are likely to remain high in the fixed income market space.
Please click the links to access our weekly stock recommendation and full report.
• Stock Recommendation
• Full report
Best regards,
ARM Research
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Weekly Commentary and Stock Recommendation: 15th July – 19th July 2024