Business News: Market Recap January 2nd, 2024

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The Domestic Equity Market closed the month of December on a positive note, with a monthly return of 4.89% and market capitalization at N40.92trillion . This brought the YTD return to 45.90% (v. 39.25 % in Nov’23).

 

However, on sectoral performance, The Banking sector gained closed at 114.9%YTD, Insurance sector gained 10.98% (YTD – 84.48%), Pension sector gained 10.1% (YTD – 80.8%) led the profits. However, Industrial sector lost -2.45% (12.28%).

The Nigerian Fixed income was largely bullish in the month of Decemberas investors cherry-picked most on-the-runs maturities at attractive levels. Consequently, average yields declined by 99bps (vs 15.80% in Nov’23).

 

At the FGN Bond Auction, the DMO offered four maturities- Apr’29, Jun’33, Jun’38 and Jun’53 with stop rates at 15.5%, 16%, 16.50% and 17.15% respectively with the DMO selling a total of N4273.63bn with Total bid/cover ratio at c.3.24x.

 

At the FGN Bond Auction, the DMO offered four maturities- Apr’29, Jun’33, Jun’38 and Jun’53 with stop rates at 14.90%, 15.75%, 15.80% and 16.60% respectively with the DMO selling a total of N334.74bn versus a total offer of N360bn across all maturities.

 

At the last NTB primary auction conducted during the month, stop rates stood at 7%, 10% and 12.24% for the 91-day, 182-day and 364-day papers respectively. The DMO allocated N317.02bn across the three tenors surpassing the offer size by 3.27x.

 

Post auction, yields declined at the secondary market with unmet bids flooding the market. Consequently, the average mid-rate contracted by c.115bps to close at c.8.83%.

 

In January, we expect lower yields hinged on elevated liquidity on the back of expected maturities for the month alongside FACC inflows.

 

On the Global Scene, In the United States, the US Federal Reserve opted to maintain the current interest rates at 5.50%. This decision aligns with the backdrop of declining inflation, which eased from c.3.2% to c.3.1%. The subdued inflationary pressures suggest a moderation in economic heat.

 

This shift indicates a reassessment by market participants, who are now factoring in expectations of rate cuts throughout the entire first quarter of 2024. Reflecting this sentiment, the S&P500 saw a notable gain of c.3.81%, demonstrating investor optimism amidst the evolving economic landscape.

 

In view of this, the FOMC decided to hold the fund rate at the current levels of 5.25% - 5.5% making it the second consecutive time that the committee is holding rate in its last 2 minutes and the third time this year.

 

On the Domestic Scene, Nigeria's headline inflation witnessed an upward trajectory, reaching c.28.20% YoY in November 2023. This reflects a c.0.87% increase from the c.27.33% recorded in October 2023.

 

Notably, food inflation also contributed to this surge, registering a YoY increase of 32.84% in November 2023, marking a 1.32% rise from the 31.52% recorded in October 2023. These inflationary trends underscore the challenges faced by the Nigerian economy during this period.

 

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, in his briefing with the National assembly joint committee on banking, insurance and other financial institutions iterated his confidence in the local economy to thrive in 2024.

 

He stated that Inflationary pressures may persist in the short term but is expected to decline in 2024 and exchange rate pressures are also expected to reduce significantly with the smooth functioning of foreign exchange market.

 

He however stated that due to domestic prevailing factors, less revenues would be earned from oil exports in 2024.

 

Crude oil prices are set to end 2023 about 10% lower, the first annual decline in two years, after geopolitical concerns, production cuts and global measures to rein in inflation triggered wild fluctuations in prices. As of writing, Brent has depreciated by +1.95% to $77.53 per barrel.

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