Equity Market Shed by 1.30% w/w, as inflation Drops to 19.73%
Fed Reserve Hawkish Surprise Dominate Market Sentiment
This week, global shares see sell-off as thirteen (13) of the fourteen (14) stock markets under our coverage, as investors reassessed their stance after the Fed Reserve projected an interest rate hike sooner than once thought by the end of 2023, and the U.S Treasury yields continued to gain ground.
Consequently, all the broadest market indices in the U.S under our coverage, which includes S&P 500 Index and DJIA Index, and Nasdaq Composite Index lost 1.91% w/w, 3.45% w/w, and 0.28% w/w respectively.
Also, all the major markets around Europe, France CAC 40, German DAX, and UK FTSE 100 Index lost by 0.48% w/w, 1.56% w/w, and 1.63% w/w respectively. Also, Britain’s inflation rate jumped to 2.1% in May, as the Bank of England holds its policy meeting next week.
Furthermore, the major indices in Asia under our coverage, China Shanghai Composite, India S&P BSE Index, and Hong-Kong HANG SENG all receded by 1.80% w/w, 0.25% w/w, and 0.14% w/w respectively. Save for Japan Nikkei 225 that gained 0.05%w/w.
Accordingly, all the major indices in the emerging market indices under our coverage, Brazil’s BOVESPA, South-Africa FTSE/JSE Index, Argentina MERVAL, and Egypt EGX 30 dropped 0.80%w/w, 3.08%w/w, 1.45%w/w, and 1.13%w/w respectively.
We expect to see a mild recovery in the next trading week in reaction to the U.S Federal Reserve meeting outcome and Bank of England policy meeting.
Headline Inflation Drops to 17.93% For May
The National Bureau of Statistics (NBS) on Tuesday, June 15th, 2021 published the Consumer Price Index (CPI) for May 2021, which showed that the Headline inflation rate (a measure of the average change in the general price level of goods and services in the economy) declined further for the second consecutive time to stand at 17.93% year-on-year, from 18.12% in April 2021, representing 19 basis points lower than the previous month. However, on a month-on-month basis, the headline increased by 1.01%, which is 4bps higher than April’s print of 0.97%.
The Headline inflation year-on-year contraction was stimulated due to the Base Year effect and further slackening in the Food Price inflation (a sub-component of the Headline index), which decreased by 44bps (1.93%), from 22.72% in the previous month to 22.28%. Although, the Core Inflation rate (Non-Food price inflation sub-component) increased by 13.15% y/y, which shows a 41bps higher than the 12.74% recorded in April, and the month-on-month core index also soar by 1.24%.
Furthermore, the Urban inflation rate declined to 18.51%, which denotes 17bps lower than 18.68% computed for April, while the rural inflation rate also stood at 17.36%, representing 21bps lower than the previous month.
We believe that the decline in the inflation rate is a result of the Base Year Effect. The reference point used for comparison between two data sets in a Base effect can have some consequences on the outcome of the comparison. In this case, the Base Year Index (322.2 base point), and the Current Year index (379.9bps) were high, which resulted in a lesser price change, and also showed inflation been softened as a result of the higher price index value a year earlier.
Conclusively, the decline in food price inflation does not signify that commodity in the market has not appreciated in May, but that the contraction in the index is a reflection of the Base effect.
Equity Market Shed by 1.30% w/w, Despite Three Days Rallies
Trading activities on the Nigerian Equity Market closed w/w in the red zone, even though positive performances dominated three of the four trading sessions (as Monday was the democracy day holiday). The bearish performance was due to profit takings in large capitalized stocks. Consequently, the Market Indicators (NGX-ASI and NGX Market Capitalization) shed by –1.30% w/w to close this week at 38,648.91 absolute points and N20.14 trillion compared to 39,156.28 absolute points and N20.41 trillion last Friday. This nominally translated to a week-on-week loss of N266.04 billion in Market Capitalization value.
Four of the five major sectors closed bullish for the week, led by Banking Sector with +1.48%, Oil & Gas Sector by +1.05%, Insurance Sector by +0.76%, and Consumer Goods Sector by +0.25, while the Industrial Goods Sector closed negatively with a percentage of -0.05%.
BERGER emerged best performing stock this week with a w/w gain of +14.93%, while UACN shed -11.01% to emerge as the top loser.
A total turnover of 911 million shares worth N9.31 billion naira in 14,433 deals was traded this week by investors on the floor of the Nigerian Stock Exchange as against a total of 1.06 billion shares worth N12.83 billion naira in 17,847 deals last week.
Thirty-eight (38) equities appreciated during the week, higher than Thirty-Thirty-five (35) equities in the previous week. Twenty-five (25) equities depreciated, lower than Thirty-six (36) equities in the previous week, while ninety-eight (98) equities remained unchanged higher than ninety (90) equities recorded in the previous week.
We look forward to a mixed sentiment market as companies get ready for their Q2 Financial Reports.
The overnight (O/N) rate declined by 16.05% w/w this Friday (18/06/2021) to 19.25% when compared to 22.93% last Friday(11/06/2021). Similarly, the open buy-back (OBB) declined by 16.03% w/w on Friday (18/06/2021) to 18.75% when compared to 22.33% the previous Friday (11/06/2021).
FOREIGN EXCHANGE MARKET
At the I&E FX windows, the naira depreciated by 0.05%(w/w) to closed on Friday (18/06/2021) at ₦411.00 against ₦410.80/USD from last Friday’s position. However, at the BDC, the naira depreciated by 2.68% (w/w) from ₦485.00 (11/06/2021) last Friday to ₦498.00 this Friday (18/06/2021).
In the meantime, the foreign reserves this week weakened by $174.88 million to the level of $33.79 billion (17/06/2021) from $33.97 billion (11/06/2021),
The Brent Crude price appreciated by $0.82/barrel (w/w) to $73.51/barrel this Friday (18/06/2021) as against $72.69/barrel last Friday (11/06/2021), representing a rise of 1.13% (w/w). Similarly, the Bonny Light appreciated by $0.96/barrel (w/w) to $73.04/barrel this Friday (18/06/2021) when compared to $72.08/barrel the previous Friday (11/06/2021), representing an increase of 1.33%(w/w).
Source: GTI Research