Earlier this week, the Federal Reserve left its key monetary policy rate unchanged, a position held since July 2023, at a ten year plus high of 5.25%-5.50%. This was underpinned by sticky prices, as inflation remained higher than the Fed’s 2% inflation target in March 2024, at 3.5% YoY. Elsewhere, in the EU, Eurostat released Q1:2024 GDP numbers for the region. In Q1:2024, seasonally adjusted GDP increased by 0.3% QoQ in both the euro area and the EU, compared with the previous quarter. In the Q4:2023, GDP had declined by 0.1% QoQ in the euro area and had remained stable QoQ in the EU. On a YoY basis, GDP increased by 0.4% in the euro area and by 0.5% in the EU in Q1:2024, after increasing by 0.1% YoY in the euro area and 0.2% YoY in the EU in the previous quarter. Finally, in China, the official manufacturing purchasing managers’ index (PMI) declined to 49.2 points in April 2024 from 51.9 points in March 2024, according to data from the Chinese National Bureau of Statistics, below the 50-point mark that separates expansion and contraction in activity. The non-manufacturing PMI also fell to 56.4 points in April 2024 from 58.2 points in March 2024, and subsequently the composite PMI, which includes manufacturing and non-manufacturing activity, dropped to 54.4 points from 57.0 points during the same period.
During the week, the Nigeria Deposit Insurance Corporation (NDIC) announced substantial increases in the maximum deposit insurance coverage for various types of banks. For Deposit Money Banks (DMBs) the coverage was raised from N500,000 to N5,000,000, which now covers 98.98% of depositors. Additionally, the coverage for Microfinance Banks (MFBs) was increased from NGN200,000 to NGN2,000,000, aiming to protect 99.27% of depositors. Furthermore the coverage for Primary Mortgage Banks (PMBs) was elevated from NGN500,000 to NGN2,000,000, ensuring 99.34% coverage, which was similar to the increase in the coverage for Payment Service Banks (PSBs), covering nearly all depositors at 99.99%. Finally, for Mobile Money Operators (MMOs) pass-through deposit insurance for MMO subscribers increased to NGN5,000,000 per subscriber.
The Nigerian Equities market started off May 2024 on a positive note as the NGX All Share Index (ASI) gained 1.44% MoM to print at 99,587.25 points, bringing the market’s year-to-date (YtD) returns up to 33.18% (vs. last week: 31.30% YtD). We observed gains in the Banking (+9.42% WoW) and Insurance (+0.98% WoW) sectors only, while the Oil and Gas (-0.68% WoW), Industrial Goods (-0.36% WoW) and Consumer Goods (-0.26% WoW) sectors recorded losses. This week, FBNH (+32.7% WoW to NGN27.00), STERLINGNG (+27.7% WoW to NGN4.88) and JBERGER (+23.8% WoW) led the gainers’ chart while NASCON (-17.0% WoW to NGN43.60), NEIMETH (-14.1% WoW to NGN1.70) and BERGER (-9.9% WoW to NGN13.70) topped the losers’ chart. We believe that the performance of the equities market in the coming week would be impacted by investors’ reactions to the release of Q1:2024 earnings results, as well as the direction of yields in the fixed income market.
The Nigerian secondary market witnessed a positive Week-on-Week (WoW) performance. The Nigerian Treasury bills (NT-bills) market average yield dipped by 3bps WoW to close at 22.26%, following buying interest across the tenors. Likewise, the FGN bond market ended on a bullish note as the average yield declined by 12bps WoW to settle at 18.81%. This was on the back of buying interest across all segments of the yield curve, evident in the 26-APR-2029 (-35bps), APR-2032 (-40bps) and APR-2037 (-27bps) instruments. The Overall Naira fixed income market average yield fell by 8bps to 20.53%. Looking ahead, market conditions are expected to change in the coming week due to anticipated low inflows.
Weekly Commentary and Stock Recommendation: 29th April – 3rd May 2024
Global Economy
Earlier this week, the Federal Reserve left its key monetary policy rate unchanged, a position held since July 2023, at a ten year plus high of 5.25%-5.50%. This was underpinned by sticky prices, as inflation remained higher than the Fed’s 2% inflation target in March 2024, at 3.5% YoY. Elsewhere, in the EU, Eurostat released Q1:2024 GDP numbers for the region. In Q1:2024, seasonally adjusted GDP increased by 0.3% QoQ in both the euro area and the EU, compared with the previous quarter. In the Q4:2023, GDP had declined by 0.1% QoQ in the euro area and had remained stable QoQ in the EU. On a YoY basis, GDP increased by 0.4% in the euro area and by 0.5% in the EU in Q1:2024, after increasing by 0.1% YoY in the euro area and 0.2% YoY in the EU in the previous quarter. Finally, in China, the official manufacturing purchasing managers’ index (PMI) declined to 49.2 points in April 2024 from 51.9 points in March 2024, according to data from the Chinese National Bureau of Statistics, below the 50-point mark that separates expansion and contraction in activity. The non-manufacturing PMI also fell to 56.4 points in April 2024 from 58.2 points in March 2024, and subsequently the composite PMI, which includes manufacturing and non-manufacturing activity, dropped to 54.4 points from 57.0 points during the same period.
Domestic Economy
During the week, the Nigeria Deposit Insurance Corporation (NDIC) announced substantial increases in the maximum deposit insurance coverage for various types of banks. For Deposit Money Banks (DMBs) the coverage was raised from N500,000 to N5,000,000, which now covers 98.98% of depositors. Additionally, the coverage for Microfinance Banks (MFBs) was increased from NGN200,000 to NGN2,000,000, aiming to protect 99.27% of depositors. Furthermore the coverage for Primary Mortgage Banks (PMBs) was elevated from NGN500,000 to NGN2,000,000, ensuring 99.34% coverage, which was similar to the increase in the coverage for Payment Service Banks (PSBs), covering nearly all depositors at 99.99%. Finally, for Mobile Money Operators (MMOs) pass-through deposit insurance for MMO subscribers increased to NGN5,000,000 per subscriber.
Equities and stock recommendation
The Nigerian Equities market started off May 2024 on a positive note as the NGX All Share Index (ASI) gained 1.44% MoM to print at 99,587.25 points, bringing the market’s year-to-date (YtD) returns up to 33.18% (vs. last week: 31.30% YtD). We observed gains in the Banking (+9.42% WoW) and Insurance (+0.98% WoW) sectors only, while the Oil and Gas (-0.68% WoW), Industrial Goods (-0.36% WoW) and Consumer Goods (-0.26% WoW) sectors recorded losses. This week, FBNH (+32.7% WoW to NGN27.00), STERLINGNG (+27.7% WoW to NGN4.88) and JBERGER (+23.8% WoW) led the gainers’ chart while NASCON (-17.0% WoW to NGN43.60), NEIMETH (-14.1% WoW to NGN1.70) and BERGER (-9.9% WoW to NGN13.70) topped the losers’ chart. We believe that the performance of the equities market in the coming week would be impacted by investors’ reactions to the release of Q1:2024 earnings results, as well as the direction of yields in the fixed income market.
Fixed Income
The Nigerian secondary market witnessed a positive Week-on-Week (WoW) performance. The Nigerian Treasury bills (NT-bills) market average yield dipped by 3bps WoW to close at 22.26%, following buying interest across the tenors. Likewise, the FGN bond market ended on a bullish note as the average yield declined by 12bps WoW to settle at 18.81%. This was on the back of buying interest across all segments of the yield curve, evident in the 26-APR-2029 (-35bps), APR-2032 (-40bps) and APR-2037 (-27bps) instruments. The Overall Naira fixed income market average yield fell by 8bps to 20.53%. Looking ahead, market conditions are expected to change in the coming week due to anticipated low inflows.
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Weekly Commentary and Stock Recommendation: 29th April – 3rd May 2024