FCSL WEEKLY MARKET REPORT_8TH JANUARY, 2021

Global Economy –Rundown:
According to the International Monetary Fund, the Chinese economy is expected to grow by 2% for 2020, while subsequent year growth is anticipated at 8%. The Fund stressed that potential downside risk within the economy were identified as financial stability, as the country recorded an increased number of corporate Bond default and the pandemic was the other potential downsize to the fund projection, although the economic hostilities confronting China, are area of further moderation to IMF projection. It also stressed that the Nation’s recent string of economic recovery is fragile, as this was propelled by government support, given that private investment and consumption are below the pre-pandemic level. Despite the optimism of the Chinese Economy, Government macroeconomy support needs to continue, its structural reforms need to be ramped up, and the focus of government stimulus must be targeted at the household so that the recovery trajectory remains sustainable.
Domestic Economy –Rundown:
World Bank estimated that the Nation’s economy in 2020 will contract by 4.1%, as the ripple effect of economic distortion, as induced by the pandemic, crippled major economic activities of the Nation. The impact of the hampered economic activity within the agriculture sector affected the harvest period and other structural impediments whose pulled through effect was increased food prices that induce higher inflationary pressure on the economy. The major strain that obstructed the fiscal authority through the year was the instability in the global Oil sector that stifled the earning capacity of the country. However, the Bank anticipated growth for 2021 is estimated at 1.1%, this slim projection is induced by weaker foreign investor’s confidence, weaker government revenues, and subdued Private investment and consumption. We anticipate that the Economy will exceed this projected growth level, as we believe that government stimulus and reforms should steer the economy towards a more appreciable growth.
Currency:
The Naira firmed up in value at the I&E FX window to close at N393.50/USD, while at the parallel market, Naira contracted by 0.43% to close at N472.00/USD.
Equities
The equities market week-on-week performance contracted marginally by 0.37% growth, as the ASI YTD dipped by 0.37%. The sector performance of the NSE indices continued on a bullish run, as the average change of the NSE Indices was 5.23%, based on the indices monitored, which was propelled by a significant appreciation recorded from NSE Oil & Gas index.
Fixed Income:
The system liquidity for the week appreciated moderately, despite this both open buyback rate and overnight rates increased to 8.00% and 9.3% respectively.
T-Bills secondary market activities was bullish as the average yield dipped marginally by 4bps to 0.42% for the week, as yield across the short- and long-term maturity contracted.
The Bond secondary market, activities remained bearish, as the average yield for the week firmed up by 43bps to 7.23%, as yield appreciated across the medium-term spectrum.
 

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