Equity market Sheds 0.15% w/w, as Food Inflation Hits 16-years High
World Stocks Gain as China, U.S. Economic data back Global Recovery Hopes
This week, buying interest dominated in nine (8) of the fourteen (14) stock markets under our coverage, as a result of the batch of Chinese and U.S economic data underpin global equity market rise and decline in U.S treasury bond.
The reports show that China Q1’2021 GDP rose by 18.3% y/y and U.S. unemployment claim fell to 576,000, the lowest since the Covid-19 pandemic began.
Consequently, all of the three broadest market indices in the U.S, which include the DJIA Index, the S&P 500, and the Nasdaq Composite Index, gained by 1.18% w/w, 1.37% w/w, and 1.09% w/w respectively, as inflation fears ease.
Furthermore, two of the major market around Europe, France CAC 40, and UK FTSE 100 also gained 1.91% w/w, 1.50% w/w respectively, while German DAX lost 5.08% w/w.
Conversely, mixed sentiment prevailed across the major market in Asia, as Japan Nikkei 225, China Shanghai Composite Index, and India S&P BSE lost 0.28%w/w, 0.70%, and 1.53%w/w respectively, save Hong-Kong HANG SENG that gained 0.94%w/w.
Mixed sentiment reigned across the emerging markets under our coverage, Brazil’s BOVESPA and South-Africa FTSE/JSE Index gained 2.93%w/w and 2.24%w/w respectively, save Egypt EGX 30 and Argentina Merval Index that lost 1.56%w/w and 2.42%w/w respectively.
We expect to see some modest recovery in the next trading week in reaction to U.S and Chinese economic data results and the decline of the U.S treasury bond yield.
Nigeria Food Inflation Rate Hits 16 Years High
Following the official data released by the National Bureau of Statistics (NBS) on Thursday, April 15th, 2021, the Headline inflation rate (which is the measure of the average change in the general price level of goods and services in the economy), surged by 18.17% year-on-year (y/y) from 17.33% in February 2021, which also represents 84 basis points (bps) higher than the previous month. Likewise, on a month-on-month (m/m) basis, the headline also grew marginally by 1.56%, which is 2bp higher than the preceding month’s record of 1.54%.
The Headline Inflation increase resulted from a sharp jump in the Food Price inflation (a sub-component of the Headline index), which shoot up from 21.79% in the previous month to 22.95% (The highest Food inflation recorded in 16 years). Similarly, the Core inflation rate (Non-Food price inflation sub-component) grew by 12.67% y/y, which shows a 29bps higher than the 12.38% recorded in February, and the month-on-month basis index also increased by 1.06%.
We believe that the soar in the inflation rate was due to the increasing rate of insecurity, decline of the Naira against the Dollar in March, low purchasing power of consumers, high cost of transportation, and Agroclimatic conditions.
Finally, we expect the headline inflation rate to print 18.81% in April, as the current exchange rate is no longer sustainable, the insecurity rate worsens, and the demand for farm produce as a result of the month of Ramadan is also expected to increase the Food inflation.
Equity Market Sheds 0.15%, to lose ₦58.38 billion w/w
Transactions on the Nigerian Stock Market closed w/w on a bearish note, as bearish dominated in three of the five trading sessions. This we believe is a result of sell-off in major stocks as Treasury bill yields for a year increases further to about 9%.
Furthermore, the Market Indicators (NSE-ASI and NSE Market Capitalization) decreased by 0.15% w/w to close for this week at 38,808.01 absolute points and N20.31 trillion compared to 38,866.39 absolute points and N20.34 trillion last Friday. This nominally translates to a week-on-week loss of N25 billion in Market Capitalization value.
The Industrial sector closed positively with a percentage increase of +0.95%, while the other four major sectors closed negatively for the week, which includes, the Insurance sector, the Banking sector, the Consumer goods sector, and the Oil and Gas sector, with a percentage decrease of -4.23%, -1.51%, -0.61% and -0.29% respectively.
FTNCOCOA emerged best performing stock this week with a w/w gain of +16.28%, while CUSTODIAN shed -17.86% to emerge as the top loser.
A total turnover of 1.26 billion shares worth N10.76 billion in 19,858 deals was traded this week by investors on the floor of the Nigerian Stock Exchange as against a total of 887.04 billion shares worth N9.19 billion in 84,752 deals.
Eighteen (18) equities appreciated during the week, lower than Thirty-three (33) equities in the previous week. Forty-seven (47) equities depreciated, higher than twenty-two (22) in the previous week, while Ninety-six (96) remained unchanged, lower than One hundred and six (106) equities recorded in the previous week.
We expect the rising Fixed Income yields to continue to weigh on the equity market in the coming week. However, the awaiting Q1’2021 Corporate Earnings could trigger long term investors to the equity market.
FOREIGN EXCHANGE MARKET
The Naira this week remained unchanged against the USD at the official window to close the week at ₦379/USD as against the previous week, while it weakened in the I&E FX windows, losing 0.33% to close the week at ₦410.00/USD as against ₦409.65/USD last Friday.
In the meantime, the foreign reserves this week grew by $190million from the level of $35.04 billion (09/04/2021) to $35.23 billion (15/04/2021), as the Brent Crude oil price also gaining $4.30pbl w/w from $61.86pbl last Friday to $66.16pbl.
Source: GTI Research