Breakfast Report - 30 March, 2020
The Central Bank of Nigeria released its PMI report for the Month of March reporting Manufacturing PMI of 51.1 (February: 58.3) index points. Although the index level indicates an expansion of manufacturing activity, it grew at a slower rate when compared to the index in February. The PMI measures the business conditions in the manufacturing sector, the PMI value is derived from five indicators. For the month of March, this was the weakest expansion recorded in 3 years as both output and new orders increased at a slow pace from 58.9 and 59.1 to 54.4 and 52.3. Furthermore, declines were also observed in employment, raw materials inventories, and export orders. Given the global macroeconomic environment, the outbreak of the COVID-19 continues to weigh on production as weakened demand from households and businesses curtails manufacturing activity in the country. The contraction in new orders, employment level and inventories, is a direct outcome of a slowdown in business activities, as countries around the world close their borders, to contain the spread of the outbreak.
Equity: We anticipate a positive trading pattern in the coming week due to the attractiveness of most counters at current price levels, though the continued spread of the Coronavirus as well as the declining Crude oil prices continue to pose a threat.
Stock Watch: Investors' continued to take advantage of low pricing in the Tier one banking space as all Tier 1 stocks (except for FBNH) once again closed in the green on Friday; ZENITHBANK (+413bps), ACCESS (+407bps), UBA (+388bps) and GUARANTY (+250bps). Being the sector with the highest dividend yield at the local bourse, we expect the sector to continue to enjoy positive investor patronage spurred by attractive dividend yields.
Fixed Income: We expect the fixed income space to trade in a mixed manner next week. We also expect sell-side pressure in the bond space, driven by the developments in the crude market. Meanwhile, we foresee some level of buy-side activity in the OMO and NTB space due to the level of system liquidity.
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