Global Economy
Earlier this week, S&P Global released flash Purchasing Manager Index (PMI) reports for both the UK and US. The headline S&P Global Flash US PMI Composite Output Index dropped to 50.9 points in April 2024 from 52.1 points in March 2024. The S&P Global Flash US Manufacturing PMI, which considers a wide range of economic data, posted 49.9 points in April 2024 to signal broadly unchanged business conditions over the course of the month. The index was down from 51.9 points in March 2024 and ended a three-month sequence of improving operating conditions. In the UK, the headline seasonally adjusted S&P Global Flash UK PMI Composite Output Index rose to 54.0 points in April 2024, up from 52.8 points in March 2024. The UK Manufacturing PMI fell to 48.7 points in April 2024, vs. 50.3 points in March 2024, a 2-month low. Also, according to the US Bureau of Economic Statistics, the US Real gross domestic product (GDP) increased by 1.6% YoY in Q1:2024, according to its “advance” estimate. In the fourth quarter of 2023, real GDP increased by 3.4% YoY. Finally, in Asia, the Bank of Japan (BoJ) board members decided to hold the key interest rate steady at 0%, following its April monetary policy review meeting this week. The BoJ also removed the reference to the amount of government bonds it has roughly committed to buying each month.
Domestic Economy
During the week, the Minister of Industry, Trade, and Investment in Nigeria announced an initiative to manage a USD10bn Nigeria Diaspora Fund, focusing on private sector-led investments. Eligible firms must meet criteria such as regulatory certifications and asset management expertise. Responsibilities include establishing legal frameworks, managing investments, fundraising, and reporting. We expect this move to drive economic growth, foster private sector development, and diversify the economy. Elsewhere, Netherlands announced USD250mn in new investments in Nigeria during a meeting with President Bola Tinubu, highlighting the strengthening economic ties between the nations. Dutch investors plan to distribute the funds across various sectors, notably allocating USD100mn to a waste-to-wealth industrial project in Lagos State. This investment reflects confidence in Nigeria’s economic reforms and business environment, likely attracting more foreign capital and fostering long-term prosperity.
Equities and stock recommendation
This week, the NGX All Share Index (ASI) fell by 1.31% WoW to 98,176.76 points, bringing the Nigerian Equities market to a bearish close. Consequently, the market’s year-to-date (YtD) returns declined to 31.30% (vs. 33.12% YtD). Save for the Industrial Goods (+0.38% WoW) and Insurance (+0.02% WoW) sectors, all sectors under our coverage closed in the red zone. Specifically, the Banking (-3.10% WoW), Consumer Goods (-1.15% WoW) and Oil and Gas (-1.41% WoW) sectors ended the week negative. The top gainers for the week were SUNUASSUR (+25.0% WoW to NGN1.25), CAP (+20.2% WoW to NGN28.25) and LIVESTOCK (+14.5% WoW to NGN1.66). On the flipside, the top losers were OANDO (-19.6% WoW to NGN9.25), SOVERENINS (-18.2% WoW to NGN0.36) and FBNH (-16.3% WoW to NGN20.35). In the coming week, we expect bearish sentiment to persist in the market on the back of prevailing high yields in the fixed income market. However, this might be offset by the positioning of investors in tickers with strong fundamentals in anticipation of Q1:2024 earnings results.
Fixed Income
During the week, the Central Bank of Nigeria (CBN) held an auction, offering Nigerian Treasury bills (NT-bills) worth NGN142.57bn across the tenors (short-: NGN7.85bn, mid-: NGN12.95bn and long-term: NGN121.77bn). The average stop rate at the auction was 17.89%, unchanged from the last auction. The average bid-to-cover ratio declined by 688bps to 5.32x (vs. 12.19x at the previous auction) reflecting weak investor demand for the treasury bills. Despite the weak demand, CBN sold NGN362.45bn, exceeding the amount offered by 2.54x.
The bullish sentiment trickled down into the secondary market as the NT-bills market closed on a bullish note, with the average yield dipping by 289bps WoW to 22.29%. Similarly, the FGN bond market witnessed positive sentiment with the average yield down by 11bps WoW to close at 18.93%. This was driven by buying interest across the yield curve, specifically in the JAN-2026 (-67bps), MAR-2026 (-58bps), FEB-2034 (-33bps) and JUN-2038 (-76bps) instruments. Overall, the Naira fixed income concluded on a positive note as the average yield tapered by 150bps WoW to settle at 20.61%. Looking into the new week, we maintain our view of bearish sentiment on the back of tight liquidity in the coming week.
Click here for the full report.
Weekly Commentary and Stock Recommendation: 22nd April – 26th April 2024
Global Economy
Earlier this week, S&P Global released flash Purchasing Manager Index (PMI) reports for both the UK and US. The headline S&P Global Flash US PMI Composite Output Index dropped to 50.9 points in April 2024 from 52.1 points in March 2024. The S&P Global Flash US Manufacturing PMI, which considers a wide range of economic data, posted 49.9 points in April 2024 to signal broadly unchanged business conditions over the course of the month. The index was down from 51.9 points in March 2024 and ended a three-month sequence of improving operating conditions. In the UK, the headline seasonally adjusted S&P Global Flash UK PMI Composite Output Index rose to 54.0 points in April 2024, up from 52.8 points in March 2024. The UK Manufacturing PMI fell to 48.7 points in April 2024, vs. 50.3 points in March 2024, a 2-month low. Also, according to the US Bureau of Economic Statistics, the US Real gross domestic product (GDP) increased by 1.6% YoY in Q1:2024, according to its “advance” estimate. In the fourth quarter of 2023, real GDP increased by 3.4% YoY. Finally, in Asia, the Bank of Japan (BoJ) board members decided to hold the key interest rate steady at 0%, following its April monetary policy review meeting this week. The BoJ also removed the reference to the amount of government bonds it has roughly committed to buying each month.
Domestic Economy
During the week, the Minister of Industry, Trade, and Investment in Nigeria announced an initiative to manage a USD10bn Nigeria Diaspora Fund, focusing on private sector-led investments. Eligible firms must meet criteria such as regulatory certifications and asset management expertise. Responsibilities include establishing legal frameworks, managing investments, fundraising, and reporting. We expect this move to drive economic growth, foster private sector development, and diversify the economy. Elsewhere, Netherlands announced USD250mn in new investments in Nigeria during a meeting with President Bola Tinubu, highlighting the strengthening economic ties between the nations. Dutch investors plan to distribute the funds across various sectors, notably allocating USD100mn to a waste-to-wealth industrial project in Lagos State. This investment reflects confidence in Nigeria’s economic reforms and business environment, likely attracting more foreign capital and fostering long-term prosperity.
Equities and stock recommendation
This week, the NGX All Share Index (ASI) fell by 1.31% WoW to 98,176.76 points, bringing the Nigerian Equities market to a bearish close. Consequently, the market’s year-to-date (YtD) returns declined to 31.30% (vs. 33.12% YtD). Save for the Industrial Goods (+0.38% WoW) and Insurance (+0.02% WoW) sectors, all sectors under our coverage closed in the red zone. Specifically, the Banking (-3.10% WoW), Consumer Goods (-1.15% WoW) and Oil and Gas (-1.41% WoW) sectors ended the week negative. The top gainers for the week were SUNUASSUR (+25.0% WoW to NGN1.25), CAP (+20.2% WoW to NGN28.25) and LIVESTOCK (+14.5% WoW to NGN1.66). On the flipside, the top losers were OANDO (-19.6% WoW to NGN9.25), SOVERENINS (-18.2% WoW to NGN0.36) and FBNH (-16.3% WoW to NGN20.35). In the coming week, we expect bearish sentiment to persist in the market on the back of prevailing high yields in the fixed income market. However, this might be offset by the positioning of investors in tickers with strong fundamentals in anticipation of Q1:2024 earnings results.
Fixed Income
During the week, the Central Bank of Nigeria (CBN) held an auction, offering Nigerian Treasury bills (NT-bills) worth NGN142.57bn across the tenors (short-: NGN7.85bn, mid-: NGN12.95bn and long-term: NGN121.77bn). The average stop rate at the auction was 17.89%, unchanged from the last auction. The average bid-to-cover ratio declined by 688bps to 5.32x (vs. 12.19x at the previous auction) reflecting weak investor demand for the treasury bills. Despite the weak demand, CBN sold NGN362.45bn, exceeding the amount offered by 2.54x.
The bullish sentiment trickled down into the secondary market as the NT-bills market closed on a bullish note, with the average yield dipping by 289bps WoW to 22.29%. Similarly, the FGN bond market witnessed positive sentiment with the average yield down by 11bps WoW to close at 18.93%. This was driven by buying interest across the yield curve, specifically in the JAN-2026 (-67bps), MAR-2026 (-58bps), FEB-2034 (-33bps) and JUN-2038 (-76bps) instruments. Overall, the Naira fixed income concluded on a positive note as the average yield tapered by 150bps WoW to settle at 20.61%. Looking into the new week, we maintain our view of bearish sentiment on the back of tight liquidity in the coming week.
Click here for the full report.
Related News
Weekly commentary
How To Write A Will Without Stirring Up Family Drama
Weekly Commentary and Stock Recommendation: 14th October – 18th October 2024
Subscribe
Get a prompt weekly email from our professional team on market insights, investing strategy and valuable tips for your finances!