Global Economy

United States /China – China Bans iPhones for Government and State-Owned Enterprises Employees

The Chinese government has prohibited government and state-owned enterprise employees from using iPhones at work as part of its efforts to reduce reliance on US technology. These restrictions on foreign-made tech in government workplaces have been in place since at least 2018, but recent reports indicate that they now encompass smartphones. Many Chinese employees in affected organizations use separate phones for work. Notably, China is one of Apple’s largest markets, accounting for nearly a fifth of its revenue. Greater China, including China, Hong Kong, and Taiwan, represents Apple’s third-largest market, contributing to 19% of its $394 billion in sales last year. While the government cites the need to reduce dependence on foreign tech and prevent information leaks, this move could further strain trade relations between the two countries, given the deteriorating state of their relationship over time.

 

Japan – Economy Expands by 1.2%, still below expectations

According to the Japanese Cabinet Office, Japan’s real GDP grew by 1.2% QoQ in Q2:2023 (vs 0.7% QoQ in Q1:2023. For context, the economic growth was primarily driven by increased net exports of 3.1% QoQ (vs -3.8% QoQ Q1:2023) while imports contracted by 4.4% QoQ (vs -2.3% QoQ in Q1:2023). Economic growth remained below expectation (1.3% QoQ for Q2:2023) as declining demand and a weakening US economic growth continue to impact Japan’s economy. On an annualized basis, Japan’s economy expanded by 4.8%.

We believe that the slowdown in economic growth can be attributed to a 1.0% decrease in capital expenditure, a 0.6% contraction in private consumption, and subdued demand. Looking forward, we anticipate that the Bank of Japan (BOJ) will maintain accommodative monetary policy rates, as policymakers have stressed the importance of keeping interest rates at extremely low levels until recent cost-driven inflation transforms into price increases driven by domestic demand and higher wage growth.

 

Oil Market Uncertainty: Brace for More Volatility

Oil prices surged by nearly 1%, reaching a nine-month peak on Friday. This upward momentum stemmed from apprehensions regarding constrained oil reserves following the recent decision by Saudi Arabia and Russia to prolong supply reductions until year-end. Crude Brent prices ascended to USD90.65pb. We foresee continued volatility in oil prices due to declining demand from China, additional production cuts by OPEC+, and apprehensions surrounding the U.S. economic growth as monetary policy tightens.

Domestic Economy – Balance of Trade Remain In the Positive Territory

During the week, the National Bureau of Statistics released the Foreign Trade in Goods statistics for Q2:2023. Total Trade grew by 5.77% QoQ to print at NGN12.74trn compared to NGN12.05trn in Q1:2023. However, on a year-on-year basis, it contracted by 7.60% in Q2:2023 (vs. NGN13.79trn in Q2:2022). Total Exports grew by 8.15% QoQ to NGN7.02trn in Q2:2023 (vs NGN6.49trn in Q1:2023). Similarly, Total Imports increased by 2.99% QoQ to NGN5.73trn in Q2:2023 (vs NGN5.56trn in Q1:2023). Overall, the Balance of Trade remained in the surplus zone at NGN1.29trn in Q2:2023 (vs. NGN927.16bn in Q1:2023).

Total Export: Buoyed by FX Devaluation

We noticed a notable increase in Total Exports, an offshoot of the recovery of the economy from the trifecta effect of cash crunch, electioneering activities, and aggressive interest rate hikes. The increase in the Stanbic PMI figures from 46.83pts in Q1:2023 to 53.67pts in Q2:2023 further juxtaposes our position. Also, the devaluation of the Naira currency following the unification of the FX systems bolstered the growth as witnessed growth across the subclasses of export with Crude oil export (+8.50% QoQ to NGN5.59trn) leading the charge followed by Non-Crude Oil export (+6.80% to NGN1.43trn) and Non-oil Exports (+6.80% QoQ to NGN688.68bn).

Oil Export: Oil Export Takes the Lead Despite Declining Production

Despite lower Q2:2023 oil production (1.39mbpd vs. 1.53mbpd in Q1:2023), we saw an 8.50% QoQ increase in oil exports, likely boosted by Naira Devaluation post-FX system unification. We expect sustained oil export growth following a sustained uptrend in oil prices as uncertain China growth and ongoing production cut talks continue to foster increased energy prices.

Total Import: Bolstered by Economic Recovery

Total Imports for the second quarter edged up by 2.99% QoQ to NGN5.73bn. We attribute this to the recovery of the economy from the issues that trailed Q1:2023 as stated above. On a sectoral basis, Manufactured Goods (NGN3.10bn), Other Petroleum Oil Products (NGN1.65bn), and Raw Materials Goods (NGN567.80mn) accounted for the most imported products. This further depicts the deteriorating nature of the manufacturing sector in the country and the over-reliance on imported products in the country. Motor Spirit, Ordinary remained the most imported product at NGN1.23trn (21.50% of total exports).

The Nigerian Equities Market – The Nigerian Bourse Keeps Steady in the Positive Zone

The Nigerian Bourse closed the week on a bullish note for the third consecutive week as the NGX All Share Index added 91bps WoW to settle at 68,143.34. The market gained three (3) out of the five (5) trading days in the week as the year-to-date returns printed at 32.96%. Sectoral performance was bullish across all sectors was mixed as the Banking (+5.55%) and Consumer Goods (+2.24%) sectors closed bullish while Industrial (-0.49%), Oil and Gas (-0.12%) and Insurance (-2.94%) sectors closed on a negative note. Leading the top gainers CWG (+44.14% to NGN5.78), TANTALIZER (39.39% to NGN0.46), and OANDO (+38.74% to NGN7.70). On the flip side, CHELLARAM (-18.77% to NGN2.90), CORNERS (-11.43% to NGN1.24), and CHIPLC (-11.30% to NGN1.02). We expect mixed sentiments to trail the equities market in the coming weeks as investors may embark on profit-taking activities following the record-high performance of the bourse during the week.

 

The Nigerian Equities Market – The Nigerian Bourse Keeps Steady in the Positive Zone

The Nigerian Bourse closed the week on a bullish note for the third consecutive week as the NGX All Share Index added 91bps WoW to settle at 68,143.34. The market gained three (3) out of the five (5) trading days in the week as the year-to-date returns printed at 32.96%. Sectoral performance was bullish across all sectors was mixed as the Banking (+5.55%) and Consumer Goods (+2.24%) sectors closed bullish while Industrial (-0.49%), Oil and Gas (-0.12%) and Insurance (-2.94%) sectors closed on a negative note. Leading the top gainers CWG (+44.14% to NGN5.78), TANTALIZER (39.39% to NGN0.46), and OANDO (+38.74% to NGN7.70). On the flip side, CHELLARAM (-18.77% to NGN2.90), CORNERS (-11.43% to NGN1.24), and CHIPLC (-11.30% to NGN1.02). We expect mixed sentiments to trail the equities market in the coming weeks as investors may embark on profit-taking activities following the record-high performance of the bourse during the week.

 

The Nigerian Fixed Income Market – The Bears Dominate the Bond Market

The Nigerian Bourse closed the week on a bullish note for the third consecutive week as the NGX All Share Index added 91bps WoW to settle at 68,143.34. The market gained three (3) out of the five (5) trading days in the week as the year-to-date returns printed at 32.96%. Sectoral performance was bullish across all sectors was mixed as the Banking (+5.55%) and Consumer Goods (+2.24%) sectors closed bullish while Industrial (-0.49%), Oil and Gas (-0.12%) and Insurance (-2.94%) sectors closed on a negative note. Leading the top gainers CWG (+44.14% to NGN5.78), TANTALIZER (39.39% to NGN0.46), and OANDO (+38.74% to NGN7.70). On the flip side, CHELLARAM (-18.77% to NGN2.90), CORNERS (-11.43% to NGN1.24), and CHIPLC (-11.30% to NGN1.02). We expect mixed sentiments to trail the equities market in the coming weeks as investors may embark on profit-taking activities following the record-high performance of the bourse during the week.

The Nigerian Fixed Income Market – The Bears Dominate the Bond Market

At the primary NTB auction held during the week, the average stop rate declined by 104bps to 8.02% (compared to 9.05% at the previous auction). Likewise, the average bid-to-cover ratio fell by 101bps to settle at 4.08% (vs 5.09% at the previous auction), as demands dwindled. However, the demand for the 182-day bill rose, as its bid-to-cover ratio edged up to 3.71x from 1.21x at the last auction. However, the Treasury Bills market closed the week on a bearish note as the average yield advanced 37bps WoW to settle at 7.93%. On a similar note, the secondary bond market ended the week with a bearish undertone as the average yield rose 11bps WoW to settle at 14.16%. This is following selloffs in the JUL-2034(+45bps), JUN-2033 (+24bps), APR-2049 (+23bps), JUL-2045 (+22bps), and JAN-2042 (+21bps) instruments. For the most part, the Naira Fixed income market closed the week bearish as the average yield went up by 24bps WoW to settle at 11.05%.