Wk5 (August ’24) – Weekly Market Report

Key events on the Global Scene:

Global US equities market sustained bullish trend, on the back of heightened Fed Rate cut in September

Global US equities gained for the week on the back of better than expected job data report, ahead of Jerome Powell’s speech at the Feds annual Jackson hole symposium. During the week, The US Bureau of labour statistics deflated the non-farm payroll data by 818k jobs, signifying the economy added 174k jobs per month than expected. The less flattering picture of the economy heightened markets sentiment of a Fed rate cut in the September FOMC meeting. Consequently, The US S&P and NASDAQ rose b 1.3% and 0.7%, respectively.

Key events on the Domestic Scene:

Nigeria Inflation declines, the first decline in the headline inflation rate since December 2022

Nigeria’s headline inflation grew at a slower pace of 33.40% y/y in July 2024, down from 34.19% y/y in June, according to data from the National Bureau of Statistics (NBS). Additionally, monthly headline inflation moderated to 2.28% m/m from 2.31% m/m in June. Food inflation also saw a slight decrease, increasing at 2.47% m/m in July, compared to 2.55% m/m in June. However, core inflation rose further to 2.16% m/m in July, up from 2.06% in June. Yearly food inflation eased to 39.53% y/y, down from 40.87% y/y in June, while core inflation, which excludes volatile food and energy items, increased to 27.47% in July, up from 27.40% in June.

The Treasury bill market trended bullish, with significant unmet bids at the auction seeking several mid and long-dated papers in the secondary market. The NTB auction results showed strong investor interest in the 1-year paper, with about 88.57% subscription on the 364-Day paper. In the end, the DMO allotted ₦291.03 billion, despite offering ₦409.98 billion. Total subscription printed at c.₦1.03 trillion. The stop rates for the 91-Day, 182-Day, and 364-Day papers settled at 18.20% (-10bps), 19.20% (-10bps), and 20.90% (-98.9bps), respectively, compared to the previous stop rates. Overall, the average mid-rate declined by 91 bps week-on-week, settling at 19.81%.

The NGX bourse sustained the bearish run from the previous week, as the equities market closed 1.16% lower week-on-week. Sell pressure in DANGCEM (-10.00% w/w), GTCO (-0.87% w/w) and ZENITHBANK (-0.26% w/w) drove the market relapse, despite gains in BUACEMENT (+3.73% w/w), SEPLAT (+1.28% w/w) and ACCESSCORP (+4.18% w/w). Accordingly, the market capitalization lost ₦2.45bn w/w to close at ₦55.13trn.

On the sectoral performance, the NGX Industrial Index (-4.95%w/w), primarily driven by selloff in DANGCEM (-10.00% w/w), led the laggards, followed by the NGX Consumer Goods Index (-1.42%w/w), the NGX 30 Index (-1.29%w/w) and the NGX Pension Index (-0.06% w/w). On the flip side, the NGX Oil and Gas Index (+3.54%w/w), and the NGX Insurance Index (+1.90%w/w) and NGX Banking Index (+0.37%w/w) closed green.

Capital Market Review/Outlook (FI and Equities):

The Eurobonds market traded bullish, with increased buying interest due to dovish minutes from July’s FOMC meeting and a similarly dovish speech from Powell at the Fed’s annual economic symposium in Jackson Hole. As a result, the average mid-yield on the Nigerian curve decreased by 29 basis points week-on-week to 9.94%.

The FGN local bond market traded mixed-to-bullish, as demand increased due to improved liquidity supported by FAAC and bond coupon inflows. The stop rate for the 2029 paper closed higher at 20.30%, while the stop rates for the 2031 and 2033 papers closed lower at 20.90% (-10bps) and 21.50% (-48bps) respectively. Consequently, the average mid-yield decreased by 43 bps to 18.96% on a week-on-week basis.

The DMO held an investor roadshow for the planned FG’s debut domestic-issued FCY bond worth $500.0m as part of efforts to shore up fiscal capacity. The team hinted that total issuance could expand to $2.0bn should the initial offer ($500.0m) be met with healthy demand beginning from next Monday. Additionally, the instrument would be listed on both the NGX and FMDQ platforms to enhance liquidity and accessibility while also appealing to a diverse investor base.

Macro Economic Variables

Key Economic Variables

Securities Recommendations: