This is a brief summary of the economic events that occurred this week in the global and domestic space. This report also provides investment strategies for investors in the coming week.
Global Economy
Earlier this week, China released their Purchasing Manager Index (PMI) data, which surveys large as well as state-owned companies, closed in a contraction for the fifth straight month. The official manufacturing PMI closed at 49.7 in August, up from July’s 49.3 according to the Chinese National Bureau of Statistics. The non-manufacturing PMI, which measures business activity in services and construction, stood at 51 this month, down from 51.5 in July, according to the NBS. Elsewhere in Japan, Japan’s jobless rate rose to 2.7%, according to Statistics Bureau of Japan. The number of workers fell by 100,000 from the previous month, while those without jobs rose by 110,000. The jobless rate for women increased in all age groups, while it fell for men between the ages of 45 and 54 and between 15 and 24.
Domestic Economy
In line with the Nigerian Exchange (NGX) Domestic and Foreign Portfolio Report, total transactions on the local stock exchange increased by a significant 72.8% month-on-month in July, reaching NGN702.99 billion compared to June’s NGN406.76 billion. The surge in activity during this period was predominantly driven by domestic investors, who accounted for 94.2% of all market transactions. Domestic transactions saw an impressive 83.5% month-on-month increase, reaching NGN662.45 billion, up from June’s NGN361.02 billion.
In contrast, foreign transactions, which constituted 5.8% of the overall transactions, experienced a 11.4% month-on-month decline, dropping to NGN40.54 billion in July compared to June’s NGN45.74 billion. This is on the backdrop of the wearing-off of the effect of government’s reforms on foreign investors’ sentiment.
Looking ahead, we anticipate that domestic investors will continue to dominate the local equities market in the short to medium term. However, the potential for higher fixed-income yields may place constraints on their buying activities. Concurrently, foreign investors are expected to maintain a cautious “wait-and-see” approach in the near term, but we anticipate an improvement in foreign participation over the medium term. This medium-term outlook is contingent on the expectation of positive policy announcements and reforms by the current administration.
Equities and Stock Recommendation
This week, the Nigerian Equities Market witnessed a bullish sentiment as the market gained in four (4) out of the five (5) trading days in the week. Consequently, the NGX All Share Index (ASI) gained by 300bps WoW to 67,527.19 points. Consequently, the year-to-date returns surged to 31.76% vs 27.92% last week. Notably, on a sectoral basis, all sectors witnessed bullish sentiments; the Banking (+5.11% WoW), Industrial (+1.98% WoW), Consumer Goods (+3.75% WoW), Oil and Gas (+5.36% WoW) and Insurance (+0.80% WoW). Top gainers for the week include OMATEK (+53.3% to NGN0.46), NAHCO (+41.8% to NGN25.95) and ABCTRANS (+39.7% to NGN0.95). Whereas CWG (-19.8% to NGN4.01), JOHNHOLT (-14.4% to NGN1.31) and PRESTIGE (-12.5% to NGN0.42) led the losers’ chart. In the coming week, we expect investors to focus on tickers with attractive dividends.
Fixed Income
The Nigerian Treasury Bills market ended the week bullish as average yield declined by 63bps WoW to settle at 7.56%. Similarly, the secondary bond market ended the week bullish as average yield decreased by 4bps WoW to settle at 14.06%. This is following buying interest in the MAR-2024 (-100bps) and JUL-2034 (-34bps) instruments. Overall, the Naira Fixed income market closed bullish as average yield dipped by 33bps to settle at 10.81%.
Click here for full report.
