Weekly Report. Global Economy

Transcription

1 Global Economy Earlier this week, the US Federal reserve held its two-day meeting after which it decided to leave its key interest rate steady at a range of 1.5% to 1.75%. We believe this acknowledged the strength of the economy, which although printed at the lowest growth rate in a year at 2.3% in Q1 2018, still beat market expectations (2.0%). Predominantly, the Fed described the direction of its inflation target of 2%, currently below the reading for March 2018 (2.4%) as symmetric, which has been widely interpreted as the US Fed will be maintaining a dovish rather than hawkish stance in hiking interest rates in The Fed s stance appeared to be supportive of Brent oil prices, which remained above USD73 per barrel, as we saw the USD weaken at the tail end of the week. Furthermore, OPEC and non-opec allies continue to deliver on its production cuts with output falling further last month as it continues to keep global supply in check. An additional 400,000 barrels were taken off the market in April according to Bloomberg, bringing volumes below 32million barrels per day (mbpd). The decline in oil production was led by Iran, followed by Angola and Algeria. Also supportive of higher crude prices is the anticipation of an announcement of the U.S President, Donald Trump, to pullout from the 2015 nuclear deal that partially lifted sanctions on Iran, thereby allowing the country to re-emerge as a major oil exporter. Consequently, Iran s oil exports hit 2.6mbpd in April 2018, which could hit global oil supply potentially taking 300,000 to 500,000 bpd of Iranian oil off the market. Going forward, we see oil prices maintain these levels as the above conditions persist. We also await news concerning the US sending its high level delegations in hopes of de-escalating trade tensions between the world s two largest economies, which we believe would not yield any positive results. Nonetheless, if we see the US Fed hike rates in June, the USD is likely to strengthen which could be a negative for commodity exporting economies. Contacts: Ayodeji Dawodu Ayodeji.Dawodu@Investment-One.com Moses Hammed Moses.Hammed@Investment-one.com Olayemi Olamofe Olayemi.Olamofe@investment-one.com Abayomi Ajayi Abayomi.Ajayi@invvestment-one.com Oluwatobi Elegbede Oluwatobi Elegbede@investment-one.com Douye Mac-Yoroki Research@investment-one.com

2 Nigerian Economy The Central Bank of Nigeria s Purchasing Manager s Index for April 2018, released earlier in the week, was reflective of an expansion in both manufacturing and non-manufacturing activities. We believe sentiment in the manufacturing and trade sectors may be further supported by the announcement that Nigeria has signed a three year currency swap with China worth USD2.4billion as well as announcement that the lawmakers will be voting on the proposed 2018 budget next week. While sentiment in the manufacturing and non-manufacturing sectors have remained stronger over the last 12months, following the establishment of the Investors & Exporters FX window in April 2017, non-oil sector activities were largely uninspiring until Q (1.45% y/y GDP growth). We believe the delays in the passing of the budget hindered the full implementation of the 2017 budget. With this said, we welcome the potential passing of the N8.6trillion 2018 budget as this combined with the lower yield environment could spur output in the non-oil sector in H2 2018, potentially pushing GDP growth towards our forecast of 2.50% in Also, we see the currency swap as a positive towards Nigeria s trade relationship with China, which saw trade volumes eclipse USD6.6billion in 2017, according to the Nigeria Bureau of Statistics (NBS using N305/USD). Nonetheless, the swap should diversify and boost the nation s foreign reserves while it could also reduce import pressures. Moreover, we see the development as a catalyst for increased trade activity between both countries in the near future. We believe, going forward, that importation from China (estimated at about USD6billion in 2017, according to the NBS) may see an uptrend, given the provision of Chinese Renminbi liquidity to Nigerian businesses.

3 Equities Market The equities market was somewhat flat in the outgone week as ASI shed 0.06% week-on-week (w/w) to close at 41,218.72pts representing a market capitalization of N14.93 trillion. Year to date, the Nigerian Stock Exchange is up by 7.78%. Market performance was largely driven by the sell-off in DANGSUGAR (-80pts), NESTLE (-44pts), UNILEVER (-38pts) and DANGFLOUR (-36pts), which outweighed the gains in GUARANTY (+28pts), UBN (+37pts) and DANGCEM (+24pts). Sector performances were mixed in the outgone week with Banking (+1.56%) the best performer. While Consumer Goods (-1.89%) and Oil & Gas (-1.42%) closed negative, Industrial (+1.06%) printed in the green. Under our coverage, CCNN (+14.62%) was the best performing stock while DANGFLOUR (-18.57%) topped the losers chart. While daily average volume traded fell by 9% w/w, daily average value traded increased by 6% w/w, as investors traded a daily average of 333million units of shares worth N5.21billion. Going forward, we expect the market to remain volatile in the absence of positive news flow. With this said, we highlight the potential for the market to gain as the recent downtrend presents a decent entry opportunity into some of our quality names. TOP PICKS: ACCESS, DANGCEM, GUARANTY, NB, NESTLE, UBA & ZENITHBANK NSE-ASI One-week Performance Sector performance Source: Bloomberg, NSE, Investment One Research

4 Fixed Income and Currencies Money Market Despite CBN s sales of N599billion worth of OMO bills in the outgone week, O/N rate declined by 9bps to close at 3.33% while OBB closed flat at 2.83%. This may not be unconnected with the level of system liquidity coupled with N281billion worth of bills that matured on Thursday. At the NTB auction on Wednesday, CBN sold N9.54billion, 47.71billion and N38.17billion of the 91-day, 182-day and 364-day bills at respective stop rates of 10.00%, 10.95% and 11.15%. We highlight that these stop rates were 90bps, 105bps and 93bps lower than the last auction respectively. In the absence of OMO auction, we expect system liquidity to improve as N290.92billion worth of OMO bills would be maturing next week Thursday. Bond Market The bond market was bearish in the outgone week as yields increased across most tenors. Consequently, the yields on the 5yr, 7yr and 10yr benchmark bonds increased by 18bps, 10bps and 19bps to close at 13.25%, 13.10% and 13.17% respectively. In the near term, we expect market activities to be influenced by liquidity levels as well as foreign investor participation. Foreign Exchange Market The Naira maintain its N305 levels against the USD at the interbank market as it continues to see support from CBN s intervention sales. Similarly, the Naira was somewhat flat at N362 against the USD at the parallel market. In the near term, we expect the NGN to continue to see support from CBN s FX intervention sales. Money Market rates Tenor 27-Apr 04-May Chg Overnight 3.42% 3.33% -9bps 1month 12.05% 11.27% -78bps 3month 14.00% 12.94% -106bps 6month 15.84% 14.13% -171bps Treasury Bill Tenor 27-Apr 04-May Chg 91D 11.01% 11.63% +62bps 182D 11.51% 11.94% +43bps 364D 13.25% 12.85% -40bps FGN Bond Yields Tenor 27-Apr 04-May Chg 5yr 13.07% 13.25% +18bps 7yr 13.00% 13.10% +10bps 10yr 12.98% 13.17% +19bps Foreign Exchange rate Rates 27-Apr 04-May Chg Interbank (N/US$) % Parallel (N/US$) % Futures contracts Last week Since inception Opened (US$'m) , Matured (US$ m) N/A 9, Outstanding(US$ m) N/A 3, Macro Indicators Inflation as at March % GDP growth as at Q % External reserves as at 03/05/2018* US$47.58bn *Based on 30-day moving average

5 The Week Ahead United States The Trade Balance for the month of March 2018 will be released on the 9th of May 2018 United Kingdom The CPI report for the month of April 2018 will be released on the 8th of May 2018 France The Inflation report for the month of April 2018 wll be released on the 9th of May 2018 Germany The Inflation report for the month of april 2018 will be released on the 7th of May 2018 Canada The Unemployment rate for the month of April 2018 will be released on the 7th of May 2018 Japan The Trade Balance for the month of March 2018 will be released on the 9th of May 2018 China The Inflation report for the month of April 2018 will be released on the 8th of May 2018 The trade balance for the month of April 2018 will be released on the 8th of May 2018

6 Investors & Exporters FX (IEFX) Window and Parallel Market Rates 27-Apr Apr May May May-18 NAFEX Opening rate (NGN/USD) NAFEX Closing rate (NGN/USD) Parallel Closing rate (NGN/USD) NAFEX Turnover (US$ m) N/A Source: FMDQ, AbokiFX, Investment One Research Foreign Exchange Interbank rate, 3M Forward rate and *External Reserves Movement *Based on 30-day moving average Source: CBN, Bloomberg, Investment One Research Weekly Turnover at the Investors & Exporters FX Window Source: FMDQ, Investment One Research

7 Weekly Stock Performance 4-May Apr May w Low 52w High W/W (%) YTD (%) NGSEINDX INDEX 41, , , , , % 7.78% BANKING Company 4-May Apr May w Low 52w High Return (%) YTD (%) ACCESS % 8.13% DIAMONDBNK % 40.67% ETI % 20.88% FBNH % 42.61% FCMB % 72.97% FIDELITYBK % -1.63% GUARANTY % 11.17% SKYEBANK % 70.00% STANBIC % 19.28% STERLNBANK % 52.78% UBA % 13.59% UBN % % WEMABANK % 69.23% ZENITHBANK % 7.25% 1.49% 15.44% CEMENT Company 4-May Apr May w Low 52w High Return (%) YTD (%) CCNN % 1.35% DANGCEM % 0.07% WAPCO % -0.06% 0.28% 0.06% OIL AND GAS Company 4-May Apr May w Low 52w High Return (%) YTD (%) CONOIL % 0.14% FO % -0.01% MOBIL % -0.07% OANDO % 0.39% SEPLAT % 0.20% TOTAL % -0.03% -2.40% 0.16% BREWERIES Company 4-May Apr May w Low 52w High Return (%) YTD (%) GUINNESS % 0.10% NB % -0.04% INTBREW % -0.05% -0.40% -0.03% CONSUMERS Company 4-May Apr May w Low 52w High Return (%) YTD (%) CADBURY % -0.16% DANGFLOUR % -0.06% DANGSUGAR % -0.05% FLOURMILL % 0.22% HONYFLOUR % 0.26% NESTLE % 0.03% PZ % 0.09% UACN % 0.07% UNILEVER % 0.28% -2.96% 0.08% Source: NSE, Investment One Research

8 Equity Market Indices Africa Value DOD MOM YTD 52 WK LO. 52 WK HI. DAILY VOL. MKT CAP. (x) P/BV (x) D.Y NGSEINDX INDEX 41, % 1.15% 7.78% 25, , % JALSH INDEX 57, % 5.58% -3.12% 50, , % NSEASI INDEX % -9.77% 2.20% % EGX 30 INDEX 17, % 1.85% 18.73% 12, , % MAURITIUS 2, % -0.19% 3.64% 2, , % MOROCCO % 0.68% 3.97% % MSCI FM % -6.04% -2.79% % Emerging Value DOD MOM YTD 52 WK LO. 52 WK HI. DAILY VOL. MKT CAP. (x) P/BV (x) D.Y SHANGHAI SE 3, % -1.28% -6.54% 3, , , % S&P BSE SENSEX 34, % 5.74% 2.52% 29, , % KARACHI , % -3.40% 10.05% 37, , % IBOV INDEX 83, % -1.34% 8.94% 60, , % INDEXCF INDEX N/A N/A N/A N/A 1, , N/A N/A N/A N/A N/A MSCI EM 1, % -1.54% -1.78% , , % Developed Value DOD MOM YTD 52 WK LO. 52 WK HI. DAILY VOL. MKT CAP. (x) P/BV (x) D.Y DOW JONES 24, % -0.37% -2.21% 20, , % S&P 500 INDEX 2, % 0.14% -0.94% 2, , % FTSE 100 INDEX 7, % 7.42% -1.71% 6, , % CAC 40 INDEX 5, % 7.08% 3.64% 4, , % DAX INDEX 12, % 6.94% -1.00% 11, , % NIKKEI , % 5.54% -1.28% 19, , % HANG SENG 29, % 1.38% 0.02% 24, , , % FTSE STR TIMES % 0.73% -4.43% % MSCI U.S 2, % -0.50% -1.46% 2, , % Source: Bloomberg, Investment One Research

9 Stock Valuation and Peers Banks Source: Bloomberg, Investment One Research Sector TP (N) Price (N) Up/Downside MCap. (US$'m) EPS Growth 2018 (y/y) P/BV Access Bank Nigeria Banking % % 71.65% 12.74% 7.50% ETI Nigeria Banking % 1, N/A 75.85% % 7.02% FBNH Nigeria Banking % 1, % 67.77% 6.68% 5.35% GTBank Nigeria Banking % 3, % % 32.57% 6.17% Diamond Bank Nigeria Banking % % 20.76% 2.55% 1.37% FCMB Nigeria Banking % % 26.88% 5.12% 5.43% Fidelity Bank Nigeria Banking % % 34.95% 8.00% 8.97% Stanbic Nigeria Banking % 1, % % 28.95% 3.42% Sterling Bank Nigeria Banking % N/A 66.67% 46.15% 9.00% 0.91% UBA Nigeria Banking % 1, % 82.03% 15.89% 7.61% UBN Nigeria Banking % N/A N/A 9.64% 41.08% 5.60% N/A Wema Bank Nigeria Banking % N/A N/A % 68.42% N/A N/A Zenith Bank Nigeria Banking % 2, % % 26.35% 9.89% Barclays South Africa Banking 20, , % 12, % % 13.62% 6.32% Nedbank South Africa Banking 29, , % 11, % % 14.33% 4.89% Equity Bank Kenya Banking % 1, % % 21.73% 4.50% KCB Kenya Banking % 1, % % 19.46% 6.62% ADCB UAE Banking % 9, % % 16.45% 6.46% Gulf Bank Kuwait Banking % 2, % % 8.18% 3.85% BPI Phillipines Banking % 8, % % 12.96% 1.91% SHB Saudi Arabia Banking N/A N/A N/A N/A N/A 25.81% N/A 10.17% N/A 2, , % 3, % % 12.79% 5.46% Industrials Sector TP (N) Price (N) Up/Downside MCap. (US$'m) EV/EBITDA EV/EBITDA EPS Growth 2018 (y/y) DY Dangote Cement Nigeria Industrials % 11, % 5.41% Lafarge Wapco Nigeria Industrials % 1, N/A 2.95% Siam Cement Thailand Industrials % 17, % 4.18% Cemex Mexico Industrials % 8, % 0.00% Ultratech Cement India Industrials 4, , % 16, % 0.34% Semen Persero Indonesia Industrials 10, , % 3, % 2.33% PPC Ltd South Africa Industrials % 1, N/A 0.00% Holcim Indonesia Industrials % N/A N/A % N/A 2, , % 7, Agriculture EV/EBITDA EV/EBITDA EPS Growth 2018 Sector TP (N) Price (N) Up/Downside MCap. (US$'m) (y/y) DY Okomu Oil Palm Nigeria Agriculture % Presco Nigeria Agriculture % N/A BW Plantation Indonesia Agriculture N/A N/A N/A N/A N/A 0.52 N/A United Malacca Malaysia Agriculture % Sampoerna Agro Indonesia Agriculture 2, , % Kwantas Malaysia Agriculture N/A 1.47 N/A N/A N/A N/A N/A N/A % ROE 2018E DY

10 Oil & Gas Sector TP (N) Price (N) Up/Downside MCap. (US$'m) EV/EBITDA EV/EBITDA EPS Growth 2018 (y/y) DY Forte Oil Nigeria Oil & Gas % % 4.77% Conoil Nigeria Oil & Gas % N/A N/A N/A N/A 22.82% N/A Mobil Nigeria Oil & Gas % % 4.51% Oando Nigeria Oil & Gas % N/A N/A Total Nigeria Oil & Gas % % 5.82% Seplat Nigeria Oil & Gas % 1, N/A 2.93% Zhejiang Haiyue China Oil & Gas N/A N/A N/A N/A % N/A Grupa Lotos Warsaw Oil & Gas % 2, % 2.46% Erg Spa Italy Oil & Gas % 3, % 3.35% Hindustan Pet. Corp India Oil & Gas % 6, % 5.61% Shell Oman Oil & Gas N/A 1.65 N/A N/A N/A N/A % N/A Turcas Petrol Turkey Oil & Gas N/A 2.11 N/A % N/A % 1, Breweries EV/EBITDA EV/EBITDA EPS Growth 2018 Sector TP (N) Price (N) Up/Downside MCap. (US$'m) (y/y) DY Nigerian breweries Nigeria Breweries % 2, % 3.56% Guinness Nigeria Breweries % N/A 1.66% International BrewerieNigeria Breweries % 1, % 1.34% Heineken Netherlands Breweries % 59, % 1.79% Ghana Breweries Ghana Breweries N/A 2.60 N/A N/A N/A N/A N/A AEFES Turkey Breweries % 3, N/A 1.32% EABL Kenya Breweries % 2, N/A % 2.98% CCU Chile Breweries 9, , % 5, % 2.24% 1, , % 9, Consumer Goods Sector TP (N) Price (N) Up/Downside MCap. (US$'m) EV/EBITDA EV/EBITDA EPS Growth 2018 (y/y) DY PZ Nigeria FCMG % N/A % 1.77% Unilever Nigeria FCMG % 1, % 1.79% Cadbury Nigeria FCMG % N/A 3.86% Dangote Sugar Nigeria FCMG % % 7.17% Dangote Flour Nigeria FCMG % N/A N/A 0.00% Flour Mill Nigeria Nigeria FCMG % % 4.76% Nestle Nigeria FCMG 1, , % 3, % 3.04% UACN Nigeria FCMG % % 5.22% Strauss Group Israel FCMG 8, , % 2, N/A % 1.94% Illovo sugar South Africa FCMG N/A N/A N/A N/A 7.94 N/A N/A N/A % N/A Tongatt Hullet South Africa FCMG 11, , % % 4.01% Jollibee Food Phillipines FCMG % 5, % 0.93% 1, , % 1, Source: Bloomberg, Investment One Research

11 Commodities Screen Sheet Energy Price (USD) Absolute Chg Chg WTD Chg MTD Chg QTD Chg YTD Chg 3M Chg 6M Chg 52 WK HI. (USD) 52 WK LO. (USD) Brent Crude (Spot) % -0.56% -1.26% 5.62% 10.99% 8.22% 19.57% Gas Oil Futures % -0.61% -0.61% 5.12% 8.54% 6.93% 18.40% Natural Gas (Futures) % -2.27% -1.99% -0.91% -8.30% -4.85% -9.25% WTI Crude (Spot) % 1.22% 0.53% 6.14% 14.08% 5.32% 23.89% Precious Metal Price (USD) Absolute Chg Chg WTD Chg MTD Chg QTD Chg YTD Chg 3M Chg 6M Chg 52 WK HI. (USD) 52 WK LO. (USD) Gold (Spot) $/OZ % -1.02% -0.37% -1.13% 0.59% -2.18% 2.23% Silver (Spot) $/OZ % -0.01% 0.57% 0.84% -4.32% -1.82% -2.55% Platinum Spot $/OZ % -1.34% -0.03% -2.50% -3.22% -9.54% -1.93% Copper 3MO ($) % 0.44% 0.29% 1.68% -5.80% -3.09% -0.99% Food Price (USD) Absolute Chg Chg WTD Chg MTD Chg QTD Chg YTD Chg 3M Chg 6M Chg 52 WK HI. (USD) 52 WK LO. (USD) Wheat (CBT) Future % 6.86% 3.32% 17.41% 24.00% 18.52% 24.37% Sugar #11 (WORLD) % 3.12% 0.43% -6.32% % % % Cotton No.2 Futures % -1.03% -0.27% 3.67% 7.40% 9.25% 22.89% Source: Bloomberg, Investment One Research

12 Disclaimer This publication is for general information only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed in this article represent the current, good-faith views of the author(s) at the time of publication. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by INVESTMENT ONE Financial Services to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy, completeness or otherwise. Opinions expressed are our own unless otherwise stated. INVESTMENT ONE Financial Services and its affiliates may trade for their own accounts, the company may decide to take a long or short position on any securities, and/or may take the opposite side of public orders. Past performance is no guarantee of future results. The inclusion of past performance figures is for illustrative purposes only. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. This is not in any sense a solicitation or offer of the purchase or sale of securities. Neither INVESTMENT ONE Financial Services nor any officer or employee of INVESTMENT ONE Financial Services accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents. Investments in general and, equities, in particular, involve numerous risks, including, among others, market risk, counterparty default risk and liquidity risk. The ratings and company profile assessments reflect the opinion of the individual analyst and are subject to change at any time. This material has been issued by Investment One, which is regulated by the Securities and Exchange Commission. Further information on any security mentioned herein may be obtained by ing: research@investment-one.com Address: Investment Management & Research INVESTMENT ONE Financial Services Limited 37, Karimu Kotun Street, Victoria Island, Lagos. Nigeria research@investment-one.com Visit us at: