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Breakfast Report - 23 August 2021

• According to the National Bureau of Statistics, headline inflation continues to ease on the back of favourable base effects, border reopening, stable PMS prices, and early retracement in the parallel market. Falling to 17.38% y/y, the economy has witnessed disinflation for the fourth consecutive month. While the deceleration in food inflation (Jul’21 21.03%) has been a causal factor, the harvest season has accelerated the pace of disinflation. Gains in core inflation, on the other hand, were reversed by the discontinuation of FX sales to Bureau De Change (BDC) operators, as core inflation ascended to an 8-year high of 13.71% y/y. In the ongoing month, we anticipate further deceleration in headline and food inflation. While core inflation is expected to rise, we do not rule out the possibility of a lower print, given the early retracement in the parallel market
• Equity: We expect the first day of this week’s session to trade mixed, with the possibility of profit taking on some recent gainers, while investors continue to anticipate the audited H2 reports of the Tier-I Banks.

 

• Fixed Income: We expect the bonds market to open the week on an active note with a bullish tilt, on the back of news about the DMO’s plans to return to the international debt market next month for the first tranche of Eurobonds issuance. Meanwhile, we also expect the NTB and OMO spaces to trade actively in the next session, given the current level of system liquidity.