Global Economy
In January 2024, headline inflation in the US saw a slight uptick, rising by 0.3% month-on-month (MoM), compared to December’s 0.2% MoM increase, as reported by the Bureau of Labor Statistics (BLS). However, year-on-year (YoY) inflation experienced a slight decrease, settling at 3.1%, down from December’s 3.4% YoY. The increase in inflation was primarily propelled by a 0.6% MoM rise in shelter costs in January, continuing to strain household budgets. Meanwhile, core inflation, excluding volatile food and energy, showed a marginal uptick to 0.4% MoM and 3.9% YoY, indicating persistent price pressures despite the slowdown in headline inflation. Looking ahead, it remains uncertain whether inflation will continue its upward trajectory or stabilize in the upcoming months. The Federal Reserve will closely monitor inflation data as it determines future monetary policy actions. In the UK, headline inflation remained unchanged at 4.0% YoY in January compared to December 2023. On a MoM basis, headline CPI noted a 0.6% decrease from the surprising 0.4% MoM increase in December 2023. Housing and household services, particularly energy costs, contributed the most to the annual inflation rates. Conversely, furniture, household goods, and food experienced price decreases, partially offsetting the upward trends. Core inflation, excluding volatile energy, food, alcohol, and tobacco, remained stable at 5.1% YoY from December 2023. With inflation seemingly stabilizing and concerns about a potential recession looming, it is anticipated that the Bank of England (BoE) might maintain current interest rates to allow the economy to adjust and further evaluate the trajectory of inflation.
Domestic Economy
During the week, the National Bureau of Statistics (NBS) released the Consumer Price Index (CPI) for January 2024. The headline inflation experienced a 98bps increase, reaching 29.90% year-on-year (YoY), compared to 28.92% YoY in December 2023. This upswing was primarily fueled by a significant uptick in Food inflation (+148bps to 35.41% YoY) and Core Inflation (+52bps to 23.59% YoY). On a month-on-month (MoM) basis, the headline inflation rose by 35 bps, reaching 2.64% MoM, in contrast to 2.29% MoM in December 2023. This increase is attributed to a rise in both Food inflation (+49bps to 3.21% MoM) and Core inflation (+42bps to 2.24% MoM). Furthermore, the Central Bank of Nigeria (CBN) has implemented new measures impacting international oil companies, limiting their immediate foreign exchange transfers. This addresses the issue of “cash pooling,” allowing only 50% immediate repatriation and the rest after 90 days. Additionally, the CBN has adjusted Price Verification System (PVS) limits to -15% to +15% for import and export pricing, aiming to enhance foreign exchange efficiency. Lastly, authorized dealer banks are now required to process Personal and Business Travel Allowances electronically, promoting transparency and stability in the foreign exchange market. These changes reflect the CBN’s commitment to addressing forex challenges.
Equities and stock recommendation
Making a rebound, from last week’s bearish sentiments, the Nigerian Equities market closed in the green zone as the NGX All Share Index (ASI) grew by 3.79% WoW and 41.39% YtD to 105,722.80 points. This comes after the market gained in four (4) out of five (5) trading days of the week. This week, the Consumer Goods sector (+10.96% WoW) led the gains followed by the Oil and Gas (+5.25% WoW) and Insurance (+2.66% WoW) sectors. On the other hand, the Industrial Goods (-1.83% WoW) and Banking (-1.34% WoW) sectors closed bearish. This week, GEREGU (+33.3% WoW to NGN901.00), BUAFOODS (+20.8% WoW to NGN357.50) and ROYALEX (+20.0% WoW to NGN0.84) topped the gainers’ chart, while MEYER (-19.0% WoW to NGN5.60), MORISON (-18.7% WoW to NGN2.48) and DEAPCAP (-14.3% WoW to NGN0.60) led the decliners’ chart. We expect the mixed sentiment in the equities market in the coming week as investors price in recently released 2023FY earnings results.
Fixed Income
The Nigerian Treasury Bills market closed the week negative with the average yield rising by 12bps WoW to 15.47%. Likewise, the FGN Bond market closed on a bearish note, with the average yield surging 63bps WoW to close at 16.12%. This was driven by sell-offs across the yield curve. Overall, the Naira Fixed Income market ended the week bearish, with the average yield increasing by 38bps WoW to close at 15.80%. We expect this bearish sentiment to persist in the near term.
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Weekly Commentary and Stock Recommendation: 9th February – 16th February 2024
Global Economy
In January 2024, headline inflation in the US saw a slight uptick, rising by 0.3% month-on-month (MoM), compared to December’s 0.2% MoM increase, as reported by the Bureau of Labor Statistics (BLS). However, year-on-year (YoY) inflation experienced a slight decrease, settling at 3.1%, down from December’s 3.4% YoY. The increase in inflation was primarily propelled by a 0.6% MoM rise in shelter costs in January, continuing to strain household budgets. Meanwhile, core inflation, excluding volatile food and energy, showed a marginal uptick to 0.4% MoM and 3.9% YoY, indicating persistent price pressures despite the slowdown in headline inflation. Looking ahead, it remains uncertain whether inflation will continue its upward trajectory or stabilize in the upcoming months. The Federal Reserve will closely monitor inflation data as it determines future monetary policy actions. In the UK, headline inflation remained unchanged at 4.0% YoY in January compared to December 2023. On a MoM basis, headline CPI noted a 0.6% decrease from the surprising 0.4% MoM increase in December 2023. Housing and household services, particularly energy costs, contributed the most to the annual inflation rates. Conversely, furniture, household goods, and food experienced price decreases, partially offsetting the upward trends. Core inflation, excluding volatile energy, food, alcohol, and tobacco, remained stable at 5.1% YoY from December 2023. With inflation seemingly stabilizing and concerns about a potential recession looming, it is anticipated that the Bank of England (BoE) might maintain current interest rates to allow the economy to adjust and further evaluate the trajectory of inflation.
Domestic Economy
During the week, the National Bureau of Statistics (NBS) released the Consumer Price Index (CPI) for January 2024. The headline inflation experienced a 98bps increase, reaching 29.90% year-on-year (YoY), compared to 28.92% YoY in December 2023. This upswing was primarily fueled by a significant uptick in Food inflation (+148bps to 35.41% YoY) and Core Inflation (+52bps to 23.59% YoY). On a month-on-month (MoM) basis, the headline inflation rose by 35 bps, reaching 2.64% MoM, in contrast to 2.29% MoM in December 2023. This increase is attributed to a rise in both Food inflation (+49bps to 3.21% MoM) and Core inflation (+42bps to 2.24% MoM). Furthermore, the Central Bank of Nigeria (CBN) has implemented new measures impacting international oil companies, limiting their immediate foreign exchange transfers. This addresses the issue of “cash pooling,” allowing only 50% immediate repatriation and the rest after 90 days. Additionally, the CBN has adjusted Price Verification System (PVS) limits to -15% to +15% for import and export pricing, aiming to enhance foreign exchange efficiency. Lastly, authorized dealer banks are now required to process Personal and Business Travel Allowances electronically, promoting transparency and stability in the foreign exchange market. These changes reflect the CBN’s commitment to addressing forex challenges.
Equities and stock recommendation
Making a rebound, from last week’s bearish sentiments, the Nigerian Equities market closed in the green zone as the NGX All Share Index (ASI) grew by 3.79% WoW and 41.39% YtD to 105,722.80 points. This comes after the market gained in four (4) out of five (5) trading days of the week. This week, the Consumer Goods sector (+10.96% WoW) led the gains followed by the Oil and Gas (+5.25% WoW) and Insurance (+2.66% WoW) sectors. On the other hand, the Industrial Goods (-1.83% WoW) and Banking (-1.34% WoW) sectors closed bearish. This week, GEREGU (+33.3% WoW to NGN901.00), BUAFOODS (+20.8% WoW to NGN357.50) and ROYALEX (+20.0% WoW to NGN0.84) topped the gainers’ chart, while MEYER (-19.0% WoW to NGN5.60), MORISON (-18.7% WoW to NGN2.48) and DEAPCAP (-14.3% WoW to NGN0.60) led the decliners’ chart. We expect the mixed sentiment in the equities market in the coming week as investors price in recently released 2023FY earnings results.
Fixed Income
The Nigerian Treasury Bills market closed the week negative with the average yield rising by 12bps WoW to 15.47%. Likewise, the FGN Bond market closed on a bearish note, with the average yield surging 63bps WoW to close at 16.12%. This was driven by sell-offs across the yield curve. Overall, the Naira Fixed Income market ended the week bearish, with the average yield increasing by 38bps WoW to close at 15.80%. We expect this bearish sentiment to persist in the near term.
Click here for the full report.
Click here for our Stock Recommendation.
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Weekly Commentary and Stock Recommendation: 9th February – 16th February 2024