Global Economy
According to the US Bureau of Economic Analysis (BEA), US Real Gross Domestic Product (GDP) increased at an annual rate of 4.9% in Q3:2023 (vs. 2.1% in Q2:2023), according to its “advance” estimate. Compared to the second quarter, the acceleration in real GDP in Q3:2023 reflected increases in consumer spending, private inventory investment, and federal government spending. It also recorded upturns in exports and residential fixed investment. These movements were partly offset by a downturn in nonresidential fixed investment, and a deceleration in state and local government spending. Imports also offset the favorable movements as it trended higher. Elsewhere, the European Central Bank (ECB) left interest rates unchanged as expected on Thursday, ending an unprecedented streak of 10 consecutive rate hikes. With its decision, the ECB’s deposit rate stays at a record high 4% while the main rate stands at 4.5%.
Domestic Economy
Earlier this week, the 29th Nigerian Economic Summit was held, with the theme being “Pathways to Achieving Sustainable Economic Transformation and Inclusion.” This summit brought together leaders from both national and global sectors to deliberate on strategies for promoting economic growth, securing finances for sustainable development, optimizing human resources, reforming public institutions, and cultivating a culture of innovation and creativity. Some of the notable key points from the event included: Nigeria is currently anticipating a substantial influx of USD10bn in foreign exchange inflows within the next few weeks, There are no immediate plans to approach the International Monetary Fund (IMF) for a loan, as the nature of the challenges will determine the choice of the lender, The Central Bank of Nigeria (CBN) is committed to maintaining price stability as a top priority. Furthermore, Yesterday, MSCI, a well-known provider of essential resources and services for international investors, made the announcement that they have reclassified the MSCI Nigeria indexes. These indexes, previously designated as Frontier Markets, have now been shifted to Standalone Markets status. This development follows closely on the heels of a recent downgrade in September 2023 by FTSE Russell, which saw Nigeria’s classification change from Frontier Market to Unclassified Market.
Equities and stock recommendation
This week the Nigerian Equities market ended on a positive note despite losing in three (3) out of the five (5) trading days of the week. Consequently, the NGX ASI gained 33bps WoW to 67,136.58 points. The market’s year-to-date (YtD) returns printed at 31.00% (vs. 30.56% YtD last week). This week, only the Banking (+1.04% WoW) and Oil and Gas (+2.07% WoW) sectors noted gains, while the Industrial Goods (-0.15% WoW), Consumer Goods (-0,04% WoW) and Insurance (-1.12% WoW) posted losses. The top gainers for the week were CHAMS (+27.5% to NGN1.90), GEREGU (+20.6% WoW to NGN380) and EUNISELL (+19.9% WoW to NGN3.20). On the flipside, the top losers for the week were CHIPLC (-10.4% WoW to NGN1.03), JAPAULGOLD (-10.0% WoW to NGN0.99) and NSLTECH (-10.0% WoW to NGN0.27). In the coming week we expect investors to continue in their profit-taking activities.
Fixed Income
At the primary NTB auction held this week, the average stop rate surged by 332bps to 9.33% (vs 6.01% at the previous auction). However, the average bid-to-cover rate declined by 288bps to 5.90x (vs 8.78x at the previous auction) indicating a decline in the demand for the instruments. Notably the 91-day bill witnessed an increase in demand as its average bid-to-cover ratio rose by 100bps to 3.03x compared to 2.04x at the last auction. The Nigerian treasury bills market closed the week bearish as the average yield went up by 23bps WoW to settle at 7.15%. Similarly, the FGN bond market closed the week negative as the average yield increased by 43bps to 14.88%. This on the back of selloffs on all ends of the curve. Overall, the Naira Fixed income market closed the week bearish as the average yield rose by 33bps to settle at 11.01%. We maintain our view of elevated yields largely due to weak demand across the yield.
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