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Breakfast Report - 18 September 2023

In August 2023, headline inflation rose to 25.80% y/y (Vetiva estimate: 25.33% y/y), 47bps higher from July (24.08% y/y). On a month-on-month basis, headline inflation came in at 3.18%, 29bps higher than the rate recorded in July (2.89% m/m). According to the report, the significant increase reflects the impact of the removal of petrol subsidies and the devaluation of the official exchange rate on consumer prices. M/M inflation rose to 3.18% in the review month from 2.89% recorded in the prior month.  In terms of contribution to the y/y inflation. Food and non-alcoholic beverages (13.36%) contributed the most, followed by housing, water, electricity, gas, and other fuel (4.32%), and clothing and footwear (1.97%).  On a year-on-year basis, in August 2023, the Urban inflation rate was 27.69%, this was 6.73% points higher compared to the 20.95% recorded in August 2022. The Rural inflation rate stood at 24.10%, representing 3.98% points increase compared to the 20.12% recorded in August 2022.

Equity: With the positive sentiments gradually wearing off in the banks, the market is on the lookout for its next catalyst. We expect mixed trading this week, as investors mull over the latest inflation data, with headline inflation surpassing our estimate by 47bps to print at 25.80%.

Fixed Income: We expect the market to trade in a quiet manner to open the week, as investors react to the latest macroeconomic data for the country.