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.
0 Comments