Global Economy
According to the Chinese National Bureau of Statistics, China’s headline Consumer Price Index (CPI) declined by 0.2% YoY in October 2023 (vs. negative 0.1% in September 2023). On a MoM basis, CPI edged lower by 0.1% in October 2023 (vs. a 0.2% gain in September 2023). The headline figure was dragged by a further slump in pork prices, down 30.1%, higher relative to a 22% slide in September 2023, amid an oversupply of pigs and weak demand. The core CPI, excluding food and energy prices, went up 0.6% YoY in October 2023, with the pace of increase moderating slightly compared with September 2023 (0.8% YoY). The persistent downward trend in prices last month further emphasizes concerns surrounding the current deflationary pressures in China. Elsewhere, according to the UK Office of National Statistics, UK gross domestic product (GDP) is estimated to have been flat in Q3:2023, following the 0.2% QoQ increase in the previous quarter. GDP is estimated to have increased by 0.6% YoY in Q3:2023 (unchanged from Q3:2022). In output terms, there was a 0.1% QoQ drop in the services sector, which offset a 0.1% QoQ increase in construction output and a broadly flat output in the production sector.
Domestic Economy
During the week, Fitch Ratings affirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook. Key factors contributing to the rating include the country’s large economy, developed domestic debt market, and progress in reforms under the Tinubu-led administration. Positive indicators include the removal of subsidies, exchange rate unification, and a partial recovery in oil production. However, challenges include FX shortages impacting exchange rate liberalization, a weakened Net FX reserve position, and an increased government debt/GDP ratio. Fitch projects a slowdown in GDP growth, moderated inflation, and emphasizes the need for sustained oil production increase for economic resilience. While Fitch’s affirmation provides a positive outlook, improvements in key macroeconomic variables are crucial for potential upgrades and sustained investor confidence.
Equities and stock recommendation
It was a relatively bullish week for the Nigerian Equities market, as it gained in all five (5) trading days of the week. Consequently, NGX All Share Index (ASI) went up by 94bps WoW to settle at 70,854.18 points and the market’s year-to-date returns increased to 38.25% from last week’s 36.97%. We observed gains in all the sectors under our coverage except from the Insurance sector, which lost 0.53% WoW. Specifically, the Banking (+1.17% WoW), Industrial Goods (+2.73% WoW), Oil and Gas (+2.91% WoW) and Consumer Goods (+0.05% WoW) sectors closed positive. The top gainers for the week include JAPULGOLD (+55.9% WoW to NGN1.98), RTBRISCOE (+39.5% WoW to NGN0.60) and GLAXOSMITH (+29.4% WoW to NGN16.05). On the flipside, CAVERTON (-13.6% WoW to NGN1.33), NNFM (-10.0% to NGN18.00) and MULTIVERSE (-9.4% WoW to NGN2.90) were the top decliners for the week. In the coming week, we expect investors to continue in bargain-hunting activities as they search for tickers with attractive valuations.
Fixed Income
At the primary NTB auction held this week, the average stop rate increased by 225bps to 11.58% (vs 9.33% at the previous auction). While the average bid-to-cover ratio declined by 308bps to settle at 2.82% (vs 5.90% at the previous auction). There was an increase in the demand for all the instruments. The Treasury Bills market closed the week on a bullish note as the average yield declined by 93bps WoW to settle at 13.36%. Whilst, the secondary bond market ended the week on a bearish note as the average yield went up 6bps WoW to settle at 15.67%. This is following selloffs across all ends of the curve. Overall, the Naira Fixed income market closed the week bullish as the average yield dipped by 44bps WoW to settle at 14.52%. We expect bullish sentiments in the coming week as investors engage in buying activities, driven to lock in higher short-term rates.
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