Week’s Headline: U.S. Fed Reserve Unveils Taper Plan; Nigeria’s Local Bourse Halts 7-Week Positive Trend

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GLOBAL MARKET

Global Shares Mixed, As Fed Reserve Unveils Taper Plan

The U.S Fed Reserve ended its two-day Federal Open Market Committee (FOMC) meeting with a pledge to reduce its monthly purchase of Treasury securities and mortgage-backed securities from mid-November by $10bn and $5bn respectively. The FOMC agreed to taper the stimulus purchases because it has met “substantial further progress” towards its twin goal of maximum employment and inflation that averages 2%. The tapering process is set to begin mid-November, which suggests the stimulus programme will cease in June 2022, also by the same amount in December and further reductions were deemed to “likely be appropriate” each month thereafter. The Fed Reserve Chairman signaled he would be patient in interest rate hike because there is still ground to cover and he wants the labour market to heal further.

Furthermore, the U.S market got back on track last month with a larger-than-expected gain, indicating greater progress in filling millions of vacancies, as the effect of the delta variant begins to fade. According to the Labor Department, the nonfarm payroll increased by 531,000 last month after an upward revised 312,000 in September. Private payroll was even stronger, rising 614,000, as a loss of 73,000 government jobs pulled down the headline number.

Also, the Bank of England (BOE) surprised investors on Thursday by keeping interest rates steady. The apex bank is proceeding with caution on the normalization of the economic policy to allow their economies as much time as possible to recover from the ravages of the pandemic.

Germany’s industrial production dropped unexpectedly in September, falling by 1.1% month-on-month as output in Europe’s largest economy was hit by a supply bottleneck for materials. French industrial production also contracted by 1.3%.

 

Outlook

In the coming week, we expect mixed sentiment, as investors digest the decision from the monetary policymakers, especially the Fed Reserve, and positive results from the U.S job data. Also, we believe that corporate earnings will continue to influence market sentiment.

EQUITY MARKET

NGX

Local Bourse Halts 7-Week Positive Trend

Gainers 05112021

Trading activities on the Nigerian equity market ended w/w on a red note to halt the 7-weeks positive trends. Bearish market performances were recorded in two of the five trading sessions. This performance was driven by investors’ sell sentiments in bellwethers. As a result, the NGX-ASI and Market capitalization depreciated by 0.06% from 42,038.60 points and N21.938 trillion to close at 42,014.50 points and N21.926 trillion respectively. Consequently, the year to date (YTD) decreased to +4.33%, and investors lost N120 million w/w.

At the end of the week, Insurance Index emerged as the highest gainer with (+0.99%),  followed by the Industrial Goods Index (+0.88%), while the Banking Index emerged as the worst-performing sector with a percentage loss of  (-1.73%), followed by Oil & Gas (-1.63%), and Consumer Goods Index (-0.74%).

REGALINS emerged as the best-performing stock for the week with a w/w gain of +18.92%, while ETERNA emerged as the worst-performing stock with a w/w loss of -15.49%.

A total of 1.428 billion shares worth N12.372 billion in 17,603 deals were traded this week by investors, as against a total ofLosers 05112021 3.001 billion shares worth N34.547 billion in 21,621 deals

Twenty-three (23) equities appreciated at price during the week, higher than Forty-seven (47) equities in the previous week. Forty-three (43) equities depreciated in price, lower than Twenty-five (25) equities in the previous week, while ninety (90) equities remained unchanged, as against eighty-four (84) equities recorded in the previous week.

Outlook

We expect mixed sentiment this week, with bargain hunters taking positions on stocks with low prices, and profit-takers taking advantage of the appreciated ones. Furthermore, investors will also track yield movement in the fixed income market.

NASD OTC

NASD Market Extends Bearish Sentiment with a 0.18%w/w loss

Price

Transactions on the NASD OTC Security Exchange Market closed on a negative note to extend the negative sentiment to two consecutive weeks, as the NASD Security Index NSI dipped by 0.18%, representing 1.37 basis points to close at 745.49 points against 746.86 points in the previous week. Investors lost N1.13 billion for the week, as the NASD OTC Market Capitalisation closed at N615.91 billion for the week.

Total trading activity for the week was valued at N60.10 million in  43 deals, against N121.13 million in  65 deals recorded in the previous week. The most traded stocks on the exchange for the week are; SDCSCSPLC, SDFCWAMCO, SDNDEP, SDNASDPLC, and SDNIPCOPLC.

SDCSCSPLC emerged as the top loser for the week with a price depreciation of (-1.28% to N17), while there was no gainer for the week.

This week’s price depreciation resulted from investors’ sell-sentiment in medium and large capitalized stocks among which are; SDCSCSPLC (-1.28% to N17), and SDNASDPLC (-0.37% to N19.1).

OTCResultantly, the market breadth closed negatively, recordinglosers and no gainer.

Outlook

In the coming week, we expect mixed sentiment in the NASD OTC market, as investors cherry-pick volatile and attractive stocks.   

Treasury Bills

Bearish Performance On The Secondary Bond Market

Activities on the Treasury traded this week closed on a mute note, as investors trade cautiously ahead of the coming week Treasury bills primary auction.

Interest was seen majorly on the 25-Nov-21, 13-Jan-22, 27-Jan-22, 10-Feb-22, and 10-Mar-22 bills.

System liquidity indicators closed lower, as Overnight (O/N) and Open Buy Back (OBB) decreased to 12.38% and 12.00% from 18.50% and 18.00% respectively in the previous week.

NTB

OMO

Furthermore, the average yield of the Treasury Bills closed on a bearish sentiment to 5.33%, as against 5.59% recorded last week, representing a 26bps decrease.

The OMO Bills market traded on a calm note as interest was observed majorly on the mid to long tenor bills, particularly on the 1-Feb-2022, 8-Feb-2022, and 22-Feb-2022 bills.

However, the average yield on the secondary Open Market Operation (OMO) closed  bullish to 6.09% from 6.37%, representing a 28bps decrease

In the coming week, we expect the apex bank (CBN) to roll over the matured Treasury Bill instruments by offering new bills. Looking at the previous NTB auctions trend, we expect the investors’ appetite to be titled towards the longer end of the curve and the spot rate. We also anticipate large activities and bullish sentiment on the secondary money market, as a result of spill-over demand from the Treasury Bills primary auction.

Bond Market

Bond

Marginal Bullish Performance On The Secondary Bond Market

During the week, the Debt Management Office (DMO) said in a press release that is set to issue another Sovereign Sukuk Bond this year for an expected amount of N200-N250 billion to finance critical road projects across the country.

This week’s activities on the Bond market were muted and limited to the secondary market. Trading activities were relatively active, as interest was observed across all tenors.

The average yield on the bond traded on the FMDQ market closed at 8.31% from 8.32%, representing an 1bps decrease.

Outlook

In the coming week, we expect the secondary bond market to trade on a relatively quiet note, as investors keep their attention on the Treasury Bill primary auction

Money Market

weekly money market 05112021System liquidity indicators closed lower, as Overnight (O/N) and Open Buy Back (OBB) decreased to 12.38% and 12.00% from 18.50% and 18.00% respectively in the previous week.

Foreign Exchange 05112021Foreign Exchange Market

At the I&E FX window, the Naira appreciated by 0.19% to close on Friday (05/11/2021) at ₦415.10/USD against ₦415.10/USD last Friday’s position.

Foreign Reserve 05112021Foreign Reserve

The Foreign Reserve declined by $102.20 million to the level of $41.73 billion (04/11/2021) from $41.83 billion (28/10/2021)

Crude oil 06112021Crude Oil

The Brent Crude and WTI Crude depreciated by $1.12/barrel (w/w) and $2.42/barrel (w/w) to $81.15/barrel and $82.60/barrel this Friday(05/11/2021) as against $83.72/barrel and $83.57/barrel last Friday(29/10/2021), representing a decrease of 1.34% (w/w) and 2.90% (w/w). Similarly, Nigeria’s Bonny Light also decreased by $1.97 to $81.53/barrel on Friday(05/11/2021) from $83.50/barrel (29/10/2021), representing a decrease of 2.36% (w/w)

 

Source: GTI Research

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