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Breakfast Report - 02 May 2023

• The finance minister recently announced a possible extension of the removal of fuel subsidies, which was previously scheduled for June and might no longer be implemented by the outgoing administration. An extension is being considered to allow for the implementation of other economic buffers to mitigate the impact of subsidy removal. The government recently received $800 million from the World Bank for cash transfers to the most vulnerable population. A subsidy extension will also necessitate a supplementary budget, as the 2023 budget only provides for subsidies until June 2023. While we note that continued retention may continue to deplete oil earnings and tighten fiscal space, the removal of fuel subsidies will raise consumer prices even further in the near term.

 

• Equity: As expected, we have started to see moderation in the bullish run, as market breadth closed negative for the first time last week. We expect this to filter into this week’s trading session as investors continue to take profit.

 

• Fixed Income: To open the week, we anticipate another bullish session in the bonds market, given the buoyant liquidity levels. Similarly, the NTB segment is expected to trade in line with liquidity levels.

 

• Commodities: Price of commodities on the AFEX Commodities Exchange showed mixed results this week. The price of maize, soybean, paddy rice, cocoa, and cashew returned 1.63%, 0.89%, 2.76%, 10.66% and 0.10% respectively. The other commodities remained unchanged. Year-to-date, maize, soybean, paddy rice, cocoa, sesame, and cashew returned 16.38%, 12.78%, 10.46%, 50.31%, 9.28% respectively, while sorghum, and ginger returned -5.66% and -9.47% respectively.