The equities market was resurgent in the week, as the bulls made a Christmas appearance, and ran the market to a substantial 13.60 percent gain Week-to-Date (WtD). All sector indices, save for the Health Sector, trended northwards to bring the NSE ASI Year-to-Date (YtD) return to -16.70 percent.
In a top gainers’ list largely dominated by the banking sector as investors took advantage of the seemingly attractive prices, UBA led the pack with a 32.28 percent gain. The ticker was joined by TRANSCORP (28.90%), OANDO (26.79%), SKYEBANK (26.20%), and DANGCEM (22.91%).
On the other side, the laggers were led by ASHAKACEM (9.96%), INTBREW (6.81%), CAVERTON(5.36%), PHARMDEKO (4.89%), and NPFMCRFBK (4.88%).
Activities in the fixed income market were however mixed, as yields on Treasury bonds advanced by 0.26 percent as of December 23, across instruments as market expectation for better yielding new issues continues to waiver demand. Investor’s appetite for Treasury bills was high, as yields on instruments declined by 0.47 percent, with the greater part of the activity witnessed on the mid tenor instruments.
The liquidity conditions in the market have also eased somewhat WtD, as signalled by the decline in the OBB and OVN rates which declined by 3.96 percent and 4.74 percent. This came just as NIBOR across tenors also abated by1.62 percent. Also, the currency finished the week weaker, depreciating by 0.54 percent at the interbank to peg at N185.55/USD. This comes despite both the CBN’s interventions and the new zero percent Exchange trading position policy.
With particular regard to the equities market, this period was expected as asset managers make adjustments to their portfolios, and so in our opinion cannot be categorically pinpointed as the moment of market recovery especially as the risk factors which have pressured down market returns in recent weeks remain prevalent.
This report highlights the performance of Nigerian financial markets in the week, and presents an outlook for the coming week while considering internal and external factors influencing prices.
Economic roundup: IMF sees GDP growth at about 5%
The US’s Q32014 GDP expanded 5 percent, representing the fastest pace since 2003, on stronger consumer and business spending. Meanwhile, Gene Leon, who led the IMF mission to Nigeria, stated that Nigeria’s GDP growth is expected to ease to about 5 percent in 2015 against 7.3 percent forecasted earlier in October, on the back of dwindling oil prices. Fitch Ratings had earlier reviewed the country’s 2015 output growth forecast from 6.4% to 5.2 percent.
The mission noted that oil price shocks will sharply reduce fiscal revenue and limit fiscal spending, while the overall impact on GDP would most likely be offset by growth in the non-oil sector which has been the major driver of growth thus far in 2014. While naira devaluation should cause a rise in inflation, increased domestic production of staple foods is expected to moderate the overall impact on price levels according to the mission.
In a move to get tougher on speculators and arrest naira volatility, the CBN limited dollar holdings purchased from the interbank market to 48 hours post-purchase, emphasising that USD most be sold back to the CBN at its own day rate, after the stated period. Despite continued FX intervention, Reserves had tumbled 20 percent YtD as of December 22, settling at $34.93 billion (Vs.$43.61bn in January).
Away from the economy, insurgency in the country continued in the North-East with more cases of bombings, as well as another reported case of abduction of 185 women and children. The Nigerian military however noted that this is yet be confirmed.
Whilst we insist that the demographic appeal of the Nigerian economy remains compelling, we align with the view that the outlook for output expansion in the coming year is expected to be constrained by stringent monetary and fiscal measures amidst instabilities on the global and domestic fronts.
