Global Economy
Earlier this week, the Office of National Statistics (ONS) released Consumer Price Index (CPI) for August 2024. The Headline CPI rose by 2.2% YoY in August 2024, unchanged from July 2024. On a MoM basis, CPI rose by 0.3% in August 2024, the same rate as in August 2023. The largest upward contribution to the monthly change in CPI annual rates came from air fares, which rose in 2024 but fell a year ago; the largest offsetting downward contributions came from motor fuels, and restaurants and hotels. Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.6% YoY in August 2024, up from 3.3% YoY in July; the CPI goods annual rate fell from negative 0.6% YoY to negative 0.9% YoY, while the CPI services annual rate rose from 5.2% YoY to 5.6% YoY. Elsewhere, in the US, the Federal Reserve cut rates for the first time since its hiking campaign began in March 2022. Considering the progress on inflation and the balance of risks, the Fed decided to lower the target range for the federal funds rate by 50bps to 4.75%-5%. The Federal Open Market Committee committed to supporting maximum employment and returning inflation to its 2% objective. In Japan, the Bank of Japan hold its policy constant as rates were left unchanged at 0.25%, the highest since 2008.
Domestic Economy
Earlier this week, the National Bureau of Statistics (NBS) released the inflation data for August 2024, showing that headline inflation declined for the second consecutive month, dropping by 125bps to 32.15% Year on Year (YoY) from 33.40% YoY in July. This moderation was largely driven by a sharp fall in food inflation, which decreased by 201bps to 37.52% YoY, thanks to an offset of the harvest season. However, core inflation, which excludes food and energy prices, remained persistent, rising slightly by 12bps to 27.58% YoY. On a month-on-month (MoM) basis, headline inflation moderated to 2.22% in August from 2.28% in July, while food inflation eased slightly by 10bps to 2.37% MoM. Core inflation, however, edged up by 11bps to 2.27% MoM, indicating continued price pressures in sectors like housing, transportation, and healthcare, which offset the broader improvements in food prices. For September 2024, headline and food inflation are expected to continue cooling, supported by the harvest season and high base effect. However, core inflation may remain elevated due to structural challenges and rising Petroleum Motor Spirit (PMS) prices, potentially limiting a sharper decline in overall inflation.
Equities and stock recommendation
This week, the Nigerian equities market extended its bullish run, as the NGX All Share Index (NGX ASI) edged up by 0.81% WoW to 98,247.99 points. This comes after the market gained in three (3) out of the four (4) trading sessions of the week. Consequently, the market posted 31.39% YtD returns, an increase from last week’s 30.34% YtD. Positive sentiment this week was spurred by buying interest in GEREGU (+15.00% WoW to NGN1150), MTNN (+3.95% WoW to NGN199.80) and FIDELITYBANK (+24.20% WoW to NGN13.60), which offset profit-taking in OANDO (-7.36% WoW to NGN82.50), FBNH (-5.17% WoW to NGN27.50) and FLOURMILLS (-7.43% WoW to NGN50.45). On a sectoral basis, the Banking (+1.26% WoW), Insurance (+0.86% WoW) and Oil and Gas (+0.02% WoW) sectors closed positive, on the back of gains in FIDELITYBANK (+24.20% WoW to NGN13.60), AIICO (+6.25% WoW to NGN1.19) respectively. On the other hand, sell-offs in FLOURMILLS (-7.43% WoW to NGN50.45) and LAFARGE (-2.40% WoW to NGN36.55), fueled losses in the Consumer Goods (-0.77% WoW) and Industrial Goods (-0.13% WoW) sectors respectively. This week, CAVERTON (+45.3% WoW to NGN3.69), FIDELITYBANK (+24.2% WoW to NGN13.60) and FIDSON (+21.8% WoW to NGN15.95) topped the gainers’ chart, while NNFM (-19.0% WoW to NGN35.25), MBENEFIT (-14.1% WoW to NGN0.61) and RTBRISCOE (-12.9% WoW to NGN3.18) led the laggards for the week. In the coming week, the outcome of the Monetary Policy Committee (MPC) is expected to drive market performance. However, with our expectation of a pause in rate hikes, we expect mixed to positive sentiment to prevail in the market.
Fixed Income
The Nigerian Treasury bills (NT-bills) market closed on a bearish note, with the average yield increasing by 42bps WoW to 20.70%. This was primarily due to sell-offs in the short and mid-tenor bills. In contrast, the FGN bond market witnessed bullish sentiment, as the average yield declined by 19bps WoW to 18.66%. This positive trend was driven by buying interest across the yield curve, particularly in the NOV-2028 (-90bps), 17-APR-2029 (-127bps), 26-APR-2029 (-143bps), MAY-2029 (-123bps) and NOV-2029 (-95bps) instruments. Overall, the secondary Naira fixed income market concluded the week on a negative note, as the average yield rose by 12bps WoW to 19.68%. Looking ahead, the performance of the fixed income market may likely be influenced by the Monetary Policy Committee (MPC) decision next week.
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Weekly Commentary and Stock Recommendation: 17th September – 20th September 2024
Global Economy
Earlier this week, the Office of National Statistics (ONS) released Consumer Price Index (CPI) for August 2024. The Headline CPI rose by 2.2% YoY in August 2024, unchanged from July 2024. On a MoM basis, CPI rose by 0.3% in August 2024, the same rate as in August 2023. The largest upward contribution to the monthly change in CPI annual rates came from air fares, which rose in 2024 but fell a year ago; the largest offsetting downward contributions came from motor fuels, and restaurants and hotels. Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.6% YoY in August 2024, up from 3.3% YoY in July; the CPI goods annual rate fell from negative 0.6% YoY to negative 0.9% YoY, while the CPI services annual rate rose from 5.2% YoY to 5.6% YoY. Elsewhere, in the US, the Federal Reserve cut rates for the first time since its hiking campaign began in March 2022. Considering the progress on inflation and the balance of risks, the Fed decided to lower the target range for the federal funds rate by 50bps to 4.75%-5%. The Federal Open Market Committee committed to supporting maximum employment and returning inflation to its 2% objective. In Japan, the Bank of Japan hold its policy constant as rates were left unchanged at 0.25%, the highest since 2008.
Domestic Economy
Earlier this week, the National Bureau of Statistics (NBS) released the inflation data for August 2024, showing that headline inflation declined for the second consecutive month, dropping by 125bps to 32.15% Year on Year (YoY) from 33.40% YoY in July. This moderation was largely driven by a sharp fall in food inflation, which decreased by 201bps to 37.52% YoY, thanks to an offset of the harvest season. However, core inflation, which excludes food and energy prices, remained persistent, rising slightly by 12bps to 27.58% YoY. On a month-on-month (MoM) basis, headline inflation moderated to 2.22% in August from 2.28% in July, while food inflation eased slightly by 10bps to 2.37% MoM. Core inflation, however, edged up by 11bps to 2.27% MoM, indicating continued price pressures in sectors like housing, transportation, and healthcare, which offset the broader improvements in food prices. For September 2024, headline and food inflation are expected to continue cooling, supported by the harvest season and high base effect. However, core inflation may remain elevated due to structural challenges and rising Petroleum Motor Spirit (PMS) prices, potentially limiting a sharper decline in overall inflation.
Equities and stock recommendation
This week, the Nigerian equities market extended its bullish run, as the NGX All Share Index (NGX ASI) edged up by 0.81% WoW to 98,247.99 points. This comes after the market gained in three (3) out of the four (4) trading sessions of the week. Consequently, the market posted 31.39% YtD returns, an increase from last week’s 30.34% YtD. Positive sentiment this week was spurred by buying interest in GEREGU (+15.00% WoW to NGN1150), MTNN (+3.95% WoW to NGN199.80) and FIDELITYBANK (+24.20% WoW to NGN13.60), which offset profit-taking in OANDO (-7.36% WoW to NGN82.50), FBNH (-5.17% WoW to NGN27.50) and FLOURMILLS (-7.43% WoW to NGN50.45). On a sectoral basis, the Banking (+1.26% WoW), Insurance (+0.86% WoW) and Oil and Gas (+0.02% WoW) sectors closed positive, on the back of gains in FIDELITYBANK (+24.20% WoW to NGN13.60), AIICO (+6.25% WoW to NGN1.19) respectively. On the other hand, sell-offs in FLOURMILLS (-7.43% WoW to NGN50.45) and LAFARGE (-2.40% WoW to NGN36.55), fueled losses in the Consumer Goods (-0.77% WoW) and Industrial Goods (-0.13% WoW) sectors respectively. This week, CAVERTON (+45.3% WoW to NGN3.69), FIDELITYBANK (+24.2% WoW to NGN13.60) and FIDSON (+21.8% WoW to NGN15.95) topped the gainers’ chart, while NNFM (-19.0% WoW to NGN35.25), MBENEFIT (-14.1% WoW to NGN0.61) and RTBRISCOE (-12.9% WoW to NGN3.18) led the laggards for the week. In the coming week, the outcome of the Monetary Policy Committee (MPC) is expected to drive market performance. However, with our expectation of a pause in rate hikes, we expect mixed to positive sentiment to prevail in the market.
Fixed Income
The Nigerian Treasury bills (NT-bills) market closed on a bearish note, with the average yield increasing by 42bps WoW to 20.70%. This was primarily due to sell-offs in the short and mid-tenor bills. In contrast, the FGN bond market witnessed bullish sentiment, as the average yield declined by 19bps WoW to 18.66%. This positive trend was driven by buying interest across the yield curve, particularly in the NOV-2028 (-90bps), 17-APR-2029 (-127bps), 26-APR-2029 (-143bps), MAY-2029 (-123bps) and NOV-2029 (-95bps) instruments. Overall, the secondary Naira fixed income market concluded the week on a negative note, as the average yield rose by 12bps WoW to 19.68%. Looking ahead, the performance of the fixed income market may likely be influenced by the Monetary Policy Committee (MPC) decision next week.
Click here for full report
Click here for our Stock Recommendation
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