Bears tighten grip on Local bourse as investors wealth dipped by N35 billion w/w
Global stock market upbeat on economic recovery optimism
This week, buy interest dominated in thirteen (13) of the fourteen (14) stock markets under our coverage, as global shares reach a new high, amidst report that President Joe Biden is set to increase government spending to $6 trillion in the coming fiscal year.
Consequently, all the broadest market indices in the U.S under our coverage, which includes Nasdaq Composite Index, S&P 500 Index, and the DJIA Index grew by 2.06% w/w, 1.16%, and 0.94% w/w respectively.
Similarly, the major market around Europe, France CAC 40, German DAX, and UK FTSE 100 Index grew by 1.53% w/w, 0.53% w/w, and 0.06% w/w respectively, as market participant expects the European Central bank (ECB) to extend the elevated pace of its emergency bond-buying at its next meeting on June 10, despite a likely economic rebound.
Also, all the major market indices in Asia under our coverage, which includes China Shanghai Composite, Japan Nikkei 225, Hong-Kong HANG SENG, and India S&P BSE Index all increased by 3.28%w/w, 2.94%w/w, 2.34%w/w, and 1.75%w/w respectively.
Furthermore, three of the four indices in the emerging market indices under our coverage, Argentina MERVAL, Brazil’s BOVESPA, South-Africa FTSE/JSE Index increased by 5.32%w/w%, 2.42%w/w,1.17%w/w respectively, save for Egypt EGX 30 lost 4.56%w/w.
We expect to see some modest recovery in the next trading week in reaction to U.S President Joe Biden’s budget announcement despite the rise in the inflation rate.
Nigeria’s GDP Grows in Q1’2021 by 0.51%
The Nigeria Bureau of Statistics (NBS) released the official gross domestic product (GDP) figure for Q1’ 2021 on Sunday, 26th May 2021. From the released report, Nigeria’s real GDP expanded by 0.51% (year on year), slower in Q1’2021 when compared to 1.87% in Q1’2020 but higher than the 0.11% growth recorded in Q4’ 2020. This signified, that the economy is still slowly recovering from the COVID’ 19 pandemic effects.
How the Oil and Non-oil Sectors Component Performed:
Nigeria’s GDP is mainly divided into oil and non-oil sectors for clarity purposes.
The Oil sector declined by 2.21% in Q1’2021 when compared to the growth of 5.06% recorded in Q1’2020, but fared better than the negative growth of 8.89% in Q4’2020. The sector’s contribution to the economy stood at 9.25% in Q1’2021, higher than 8.16% in Q4’ 2020, but lower when compared to 9.50% in corresponding Q1’ 2020. The contraction in the oil sector as a result of the cut in OPEC’s oil production quota to 1.72mbpd in Q1’2021 from 2.07mbpd in Q1’ 2020.
The non-oil sector showed a slight recovery of 0.79% in Q1’2021, higher than the contraction of 1.25% in Q4’2020 but lower than 1.55% recorded in the corresponding Q1’ 2020. The contribution of the sector to the economy contracted to 90.75% when compared to 91.84% in Q4’2020 but higher than 90.50% recorded in the corresponding Q1’2020.
Out of the 46 sectors monitored by the Nigeria Bureau of Statistics (NBS), only 23 sectors showed positive growth, amongst which were metal ores sector (28.83%), water supply, sewage and waste management sector (14.75%), cement sector (11.20%), electricity, gas, steam, and air conditioning supply sector (8.66%), food, beverage, and tobacco sector (7.11%), human health and social services sector (4.65%) and others that showed weak and sluggish economic growth.
However, one of the main drivers of the GDP, the agricultural sector grew slower to 2.28% in Q1’ 2021, lower than 3.42% recorded in Q4’2020, but higher than 2.20% when compared to the corresponding Q1’2020. This was a result of the insecurity caused by banditry and the farmers and herders crisis in most food-producing states in Nigeria which led to an increase in food inflation despite the reopening of the land border. Also, telecommunication sector growth slowed to 7.69% in Q1’ 2021, when compared to 17.64% in Q4’2020 and 9.71% in the corresponding Q1’2020. This was due to the embargo on the registration of new SIMs cards by the federal government which impeded the growth of the telecommunication sector. The two sectors: agricultural and telecommunication sector accounts for 33% of the real GDP.
Expectations for Q2’ 2021
The GDP is projected to expand in Q2’ 2021. This, we believe will be aided by the base year GDP of (-6.10%) recorded in Q2’2020, the recent lifting of the embargo on the registration of new SIMs cards which will drive up the growth of the telecommunication sector, and also the rise in crude oil prices above $65 per barrel and increase in crude oil production from 1.48mbpd to 1.54mbpd will help propel the growth of the oil sector which have suffered from OPEC production cut. However, if the growing insecurity in the food-producing areas of the country are unchecked, the growth of the agriculture sector may be hampered.
Local Bourse Slumps by 0.18% w/w, As negative Sentiment Persists
Trading activities on the Nigerian Equity Market closed w/w on a bearish note, as negative sentiments dominated four of the five trading sessions. This was a result of investors’ sustained profit-taking in bellwether stocks. Consequently, the Market Indicators (NSE-ASI and NSE Market Capitalization) plunged by 0.18% w/w to close for this week at 38,256.95 absolute points and N19.94 trillion compared to 38,324.07 absolute points and N19.98 trillion last Friday. This nominally translated to a week-on-week loss of N35 billion in Market Capitalization value.
The insurance Sector and the Oil and Gas Sector closed positively with a percentage of (+1.01%) and (+0.85%) respectively, while the remaining three major sectors, led by, Banking Sector (-1.80%), Industrial Sector (-0.43%), and Consumer Goods Sector (-0.07%) closed negatively.
REGALINS emerged best performing stock this week with a w/w gain of +44.12%, while ABCTRANSPORT shed -17.07% to emerge as the top loser.
A total turnover of 1.04 billion shares worth N9.47 billion naira in 17,571 deals was traded this week by investors on the floor of the Nigerian Stock Exchange as against a total of 1.05 billion shares worth N11.54 billion naira in 17,218 deals
Thirty-one (31) equities were appreciated during the week, higher than twenty-six (26) equities in the previous week. Twenty-nine (29) equities depreciated, lower than forty-one (41) equities in the previous week, while one hundred and one (101) equities remained unchanged, higher than one ninety-four (94) equities recorded in the previous week.
Next week, we expect mixed sentiment as recently depreciated stocks will reverse their downturn, while the recently appreciated stocks may experience a mild correction.
FOREIGN EXCHANGE MARKET
The Naira this week remained unchanged against the USD at the I&E FX windows, the USD closed the week at ₦412.00/USD. Also, the foreign reserves this week weakened by $106.22 million to the level of $34.25 billion (27/05/2021) to $34.35 billion (20/05/2021), while the Brent Crude oil price also appreciated by $2.28 pbl w/w from $66.44 pbl last Friday to $68.72 pbl.
Source: GTI Research