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Global Economy

Earlier this week, the Office of National Statistics (ONS) released the UK September 2023 Consumer Price Index (CPI) report. According to the report, the CPI rose by 6.7% Year-on-Year (YoY) in September 2023, unchanged from August 2023. Month-on-Month (MoM), CPI rose by 0.5% in September 2023, also unchanged from September 2022. The largest downward contributions to the monthly change in CPI annual rates came from food and non-alcoholic beverages, where prices fell on the month for the first time since September 2021, and furniture and household goods, where prices rose by less than a year ago. Rising prices for motor fuel made the largest upward contribution to the change in the annual rates. Core CPI (excluding energy, food, alcohol and tobacco) rose by 6.1% YoY in September 2023, down from 6.2% in August 2023. Elsewhere, China’s National Bureau of Statistics released its Q3:2023 GDP report. According to the report, China’s Gross domestic product (GDP) grew 4.9% YoY in Q3:2023, down from 7.3% YoY in Q2:2023. On a quarter-by-quarter basis, GDP grew 1.3% in the third quarter, accelerating from a revised 0.5% in the second quarter.
Domestic Economy

Earlier this week, the National Bureau of Statistics (NBS) released the inflation report for September 2023. Headline inflation surged by 0.92% to 26.72% YoY (vs 25.80% YoY in August 2023). The increase in headline inflation can be attributed to the rise in the food inflation (+1.30%, relative to August 2023, to 30.64% YoY) and core inflation (+0.69%, relative to August 2023, to 21.84% YoY). On a Month-on-Month (MoM) basis, headline inflation declined by 108bps to settle at 2.10% MoM (vs. 3.18% MoM in August 2023). This is following a dip in food inflation as it went down by 1.41% to settle at 2.45% MoM (vs. 3.87% MoM in August 2023). However, core inflation increased by 0.05% to 2.22% MoM (vs. 2.18% MoM in August 2023). Furthermore, the Federal Executive Council has proposed a 2024 budget of over NGN26.01trn, a 19.15% YoY increase from 2023. It focuses on infrastructure, human capital, and economic diversification. The budget breakdown includes NGN10.26trn for recurrent expenditure, NGN7.97trn for capital expenditure, and NGN8.25trn for debt service. It assumes an average crude oil price of USD73.96 per barrel, 1.78MMbpd in oil production, and an exchange rate of N700/USD.

Equities and stock recommendation

The Nigerian Equities market ended this week on a negative note, as the NGX ASI lost 0.42% week-on-week (WoW) to close at 66,915.41 points. The market recorded losses in three (3) out of the five (5) trading days of the week, consequently, the market’s year-to-date (YtD) returns closed at 30.56% (vs. 31.12% YtD last week). On a sectoral basis, all the sectors under our coverage closed bearish except the Banking sector (+3.52% WoW). Specifically, Insurance (-0.96% WoW), Consumer Goods (-0.46% WoW), Industrial Goods (-0.07% WoW) and Oil and Gas (-0.02% WoW) sectors posted negative returns this week. The top gainers for the week were DAARCOMM (+9.5% WoW to NGN0.23), JBERGER (+9.1% WoW to NGN36.00) and LEARNAFRCA (+6.5% WoW to NGN3.30). On the flipside, the top losers include SOVRENINS (-17.5% WoW to NGN0.33), CADBURY (-16.0% WoW to NGN12.60) and STANBIC (-13.1% WoW to NGN69.55). In the coming week, we expect investors to continue in profit-taking activities as they position themselves in stocks expected to outperform.

Fixed Income

The Nigerian Treasury Bills market closed the week bearish as average yield went up by 0.40% WoW to settle at 6.92%. At the October primary bond auction, the DMO sold NGN334.74bn worth of bonds across the re-opening of four (4) instruments (APR-2029: NGN20.53bn, JUN-2033: NGN22.26bn, JUN-2038: NGN54.86bn, and JUN-2053: NGN237.09bn). There was an increase in the demand for the instruments as the average bid-to-cover ratio rose by 0.26% to 1.06x (vs. 0.81x at the last auction). Consequently, the average stop rate surged by 33bps to 15.76% compared to 15.44% at the last auction. The four (4) instruments (APR-2029, JUN-2033, JUN-2038 and JUN-2053) stop rates increased by 0.40%, 0.30%, 0.25% and 0.35% each to 14.90%, 15.75%, 15.80% and 16.60% respectively. The bullish sentiment trickled down to the secondary bond market as the average yield fell by 1bp WoW to close at 14.45%. This is following buying interest in the MAR-2025 (-0.41%), JAN-2026 (-0.11%) and FEB-2028 (-0.16%) instruments. Overall, the Naira Fixed income market closed the week bearish as average yield increased by 0.20% WoW to settle at 10.68%.
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