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Global Economy

Earlier this week, according to S&P Global, the US private sector’s economic activity grew at a moderate rate in November 2023, with the S&P Global Composite PMI remaining stable at 50.7 (vs. 50.7 in October 2023). While the Services PMI slightly increased to 50.8 from 50.6 during the same period, the Manufacturing PMI edged lower to 49.4 from 50.0 in November 2023, entering the contraction zone. Elsewhere, in the UK, the preliminary estimate indicated that the UK S&P Global/CIPS Manufacturing PMI increased to 46.7 in November 2023 from 44.8 in October 2023. Production shrank at its slowest rate in five months, but new job applications and employment levels were falling, mostly due to weak demand and unfavorable domestic economic conditions. In November 2023, the UK Services PMI increased to 49.5 from 49.3 in October 2023. The data indicated the UK services sector activity contracted for the fourth consecutive month, despite suggesting a minor recovery from the preceding month.

Domestic Economy

Earlier today, the National Bureau of Statistics published its Gross Domestic Product (GDP) report for Q3:2023. Despite facing economic challenges, Nigeria’s economy is charting a positive course. Real GDP grew by 2.54% YoY (vs. 2.51% in Q2:2023 and 2.25% YoY in Q3:2022). On a sectoral scale, the oil sector experienced a contraction of 0.85% YoY in Q3:2023 (vs. -13.43% YoY in Q2:2023). Conversely, the non-oil sector demonstrated resilience, achieving a growth of 2.75% YoY in Q3:2023 (vs. 3.58% YoY in Q2:2023). Notable growth was observed in the Services (+3.99% YoY), Agriculture (+1.30% YoY), and Industries (+0.46% YoY) sectors. In real terms, the Oil sector contributed 5.48% to the overall GDP in Q3:2023, while the Non-oil sector made a substantial contribution of 94.52% during the same quarter.

Equities and stock recommendation

The Nigerian Equities market closed with bullish sentiment for the third (3rd) consecutive week, as the NGX All Share Index (ASI) increased by 17bps WoW to 71,228.79 points. Consequently, the year-to-date (YtD) returns settled at 38.98% (vs. last week: 38.75% YtD). This week, only the Insurance (+4.07% WoW), Banking (+1.94% WoW) and Industrial Goods (+0.04% WoW) sectors closed positive while the Consumer Goods sector shed 53bps WoW. However, the Oil and Gas sector finished the week flat. MULTIVERSE (+45.6% WoW to NGN5.81), NSLTECH (+41.0% WoW to NGN0.55) and DEAPCAP (+40.4% WoW to NGN0.73) topped the gainers’ chart while ELLAHLAKES (-10.1% WoW to NGN3.40), INTBREW (-7.6% WoW to NGN4.25) and ABCTRANS (-5.6% WoW to NGN0.84) led the losers’ chart. We expect that investors will continue in bargain-hunting activities this coming week.

Fixed Income

At the primary NTB auction held this week, the average stop rate increased by 0.67% to 12.25% (vs 11.58% at the previous auction). Similarly, the average bid-to-cover ratio increased by 2.99% to settle at 5.82x (vs 2.82x at the previous auction). This indicates an increase in the demand for the instruments particularly the 364 day-bill (6.04x vs 2.75x at the previous auction). The Nigerian secondary Treasury Bills market closed the week on a bullish note as average yield dipped by 2.25% WoW to settle at 10.50%. However, the secondary bond market closed the week on a bearish note as the average yield rose by 0.18% WoW to settle at 15.91%. This is following selloffs across the curve. Overall, the Naira Fixed income market closed the week bullish as average yield declined by 1.03% WoW to settle at 13.21%. We expect markets to be bearish in the coming week, driven by our view of higher rates on the short end of the curve.

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