Weekly Market Review & Stock Recommendations – November 21, 2022Yahya Abdulrahman
Global Economic Roundup
OPEC Releases its Oil Demand Forecast
OPEC has cut its global oil demand growth forecast for 2022 and 2023 for the fifth time in eight months on mounting economic challenges, including high inflation, rising interest rates, high sovereign debt, tight labour markets, and supply chain constraints. The organisation trimmed demand growth for both years by 100,000b/d. It expects demand to grow by 2.55mb/d to an average of 99.6mb/d in 2022 and by 2.24mb/d to an average of 101.8mb/d in 2023. While Analysts see downside risks in covid-19 restrictions in China and the looming global recession, moderating inflation in some economies and the likely resolution of the geopolitical tension in Eastern Europe may portend some optimism.
UK inflation hits 41-year high of 11.1%
In October, inflation in the United Kingdom reached a 41-year high of 11.1%, exceeding expectations as food, transportation, and energy prices continued to squeeze households and businesses. This was disclosed by the Office for National Statistics on Wednesday. The jump was higher than the Bank of England’s forecast for inflation to peak at 10.9% and more than five times the central bank’s 2% target. The report stated that rising food prices also made a large upward contribution to the change with transport (principally motor fuels and second-hand car prices) making the largest, partially offsetting, downward contribution to the change in the rates. In October, the sharp rise in the cost of living was caused by higher gas, electricity, and food prices despite the government’s energy price guarantee, which capped bills for gas and electricity at £2,500 for a household with average usage of both fuels.
Japan’s inflation hits 40-year high as BOJ sticks to easy policy
Japan’s core consumer inflation accelerated to a 40-year high in October, driven by currency weakness and imported cost pressures that the central bank shrugs off as it sticks to a policy of ultra-low interest rates. The nationwide core consumer price index (CPI) was up 3.6% on a year earlier, exceeding the 3.5% rise expected by economists and the 3.0% gain seen in September. It was the largest jump since February 1982, when a Middle East crisis stemming from the Iran-Iraq war disrupted crude oil supply and triggered a spike in energy prices. The rise in the index, which excludes volatile fresh food prices but includes oil products, confirmed that inflation remained above the 2% goal of the Bank of Japan (BOJ) for a seventh consecutive month. But economists do not expect the BOJ to join a global trend of raising interest rates, because it sees this year’s acceleration in inflation as a cost-push episode that will fade as import costs stop pushing.
Some of our recommended stocks are mentioned below;
Stanbic IBTC Holdings Plc Q3 2022 showed that Net interest income advanced by 47.53% from N54.99bn in Q3 2021 to N79.66bn in the current period, supported by a 46.65% rise in interest income and despite the 44.13% rise in interest expense. Trading income rose by 175.93% from N9.02bn in Q3 2021 to N24.89bn in Q3 2022. Profit before tax gained 52.16% from N45.311bn in Q3 2021 to N68.95bn in the current period. Profit after tax went up by 38.14% from N39.95bn in Q3 2021 to N55.19bn in the current period, despite a 156.59% increase in income tax expense. Consequently, Stanbic IBTC Plc recorded a 39.93% rise in earnings per share from N2.93 in Q3 2021 to N4.10 in Q3 2022. Stanbic IBTC Plc has a BVPS of N29.17, P/BV of 0.99x and P/E ratio of 5.03x.
Fidelity Bank Plc Q3 2022 results showed that interest income advanced by 53.08% from N137.41bn in Q3 2021 to N210.35bn in the current period. Net interest income increased by 72.19% to N111.85bn in Q3 2022 from N64.96bn in Q3 2021. Profit before tax increased by 34.72% from N28.05bn recorded in Q3 2021 to N37.79bn in the current period. The increase in profit before tax was due to a 15.07% increase in fee and commission income. Profit after tax increased by 31.85% from N26.51bn in Q3 2021 to N34.96bn in Q3 2022, despite a 84.15% increase in income tax expense. Earnings per share increased by 31.52% from N0.92 in Q3 2021 to N1.21 in the current period. Fidelity Bank has a BVPS of N10.76, P/BV of 0.32x and P/E ratio of 2.13x.
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