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MARKETS

Nigerian Stocks snap 7-year dropping streak to put up first benefit in August

NSEASI advanced 2.5% in August outperforming the 0.9% gain in July and the 3.1% loss in June.

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Equities buying and selling in August welcomed the discharge of Nigeria’s Q2 2020 GDP data, which captured the entire effect of the lockdown on monetary sports triggered via way of means of the pandemic.

The economic system gotten smaller via way of means of 6.1% y/y from 1.9% y/y in Q1 2020, making it the worst overall performance on record, in keeping with the National Bureau of Statistics’ report.

That said, the {stock|inventory} marketplace turned into exceptionally calm for maximum of the month and seemed decoupled from the relaxation of the economic system. Despite the calmness, the NSEASI (up 4.6% QTD), superior 2.5% in August outperforming the 0.9% benefit in July and the 3.1% loss in June.

In {terms|phrases} of activity, at the same time as the common every day quantity expanded via way of means of a whopping 15.7% to 224.5 million shares, transaction price rose at a slower tempo of 1.3% relative to July level.

The absence of overseas gamers in addition stoked silence withinside the marketplace as Foreign Portfolio Investment (FPI) moderated via way of means of 91.1% y/y and q/q to $385.3m in Q2 2020, the bottom seeing that Q1 2017. FPI flowed into the equities moderated via way of means of 89.3% y/y and 91.7% q/q to $53.3m.

We {attribute|characteristic} the weak point in FPI flows to the nation’s foreign money crisis, with over $2.0 billion of overseas investor finances attempting to find an exit.

Furthermore, the {extended|prolonged} postpone withinside the submission of H1 2020 income from bellwether companies, especially withinside the banking sector, hampered funding selection making for the nearby buyers.

We are constructive that the mid-to-long-time period outlook for equities is fantastic, as economies internationally preserve to reopen for commercial enterprise and the CBN can rein withinside the chaos on the FX marketplace.

Nigerian equities are exceptionally nonetheless undervalued at 9.0x P/E ratio as compared with Egypt at 11.5x, South Africa at 19.2x, and the BRICS markets at 17.4x.

This {presents|offers|provides|gives|affords} an appealing funding possibility for long-time period buyers throughout decided on sectors, which we agree with are higher placed, in spite of the worry of a looming recession via way of means of the cease of Q3 2020.

As on the cease of the primary buying and selling week in September, all of the splendid tier-1 banks have posted their H1 2020 numbers, which confirmed resilient performances amidst the existing monetary woes. This in addition helps our mid-to-long-time period fantastic outlook.

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COMMODITIES

Oil prices plunge on fears OPEC+ may increase Oil supply

Oil traders are becoming wary that OPEC+ will increase oil output and further distort the energy demand/supply dynamics.

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Oil prices lost more than a percent at the second trading session of the week. Oil traders are virtually going to extend short on concern that OPEC may agree to increase global supply in a meeting this week and Chinese demand may be dropping.

At the time of writing this report, Brent crude dropped by 1.2%, to trade at $62.91 after losing 1.1% in the past day. U.S. West Texas Intermediate (WTI) crude dropped by 1.2%, to trade at$59.90 a barrel, having lost 1.4% on Monday.

Oil traders are becoming wary that OPEC and its allies, a group often referred to as OPEC+, will increase oil output and further distort the energy demand/supply dynamics.

The group meets is scheduled to hold on Thursday as discussions might include allowing as much as 1.5 million barrels per day of crude oil back into the market.

Stephen Innes, Chief Global Market Strategist at Axi in a note to our source  explained why the OPEC+ meeting matters most to many oil traders.

“Constructive oil market fundamentals have blown slightly off course ahead of the OPEC + meeting on Thursday as oil prices took to the plunge pool overnight, with Brent back to the soft US$63 handle after trading as high as $66.82 only last Thursday.

“Commodities were mostly weak overnight as the dollar regained a bit of ground. OPEC+ will meet this Thursday, and expectations are that despite Saudi Arabia’s call for caution, most members will push for an increase in output,” Innes stated.

Bottom line: energy pundits expect the all-important meeting this week in being one of the most interesting oil meetings in Q1, with Saudi Arabia urging producers to remain “extremely cautious”.

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COMMODITIES

Gold posts worst monthly decline since 2016, as U.S dollar keeps rising

The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support.

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Gold has of late been under immense pressure, as the Dollar Index surged to a one-week high of 90.8. The safe-haven currency is an outright alternative to gold and typically pressures gold when it gains.

The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support at the last trading session of the week, following most commodities and global stocks lower for a second straight day as global investors readjusted their portfolios.

With Friday being the last trading session for the month of February, it wrapped up the month with a 6.6% decline, its worst since a 7.2% decline in November 2016.

Gold for April delivery lost about 2.6% to settle at $1,728.80 per ounce. It earlier plunged to $1,715.05, its lowest point since a June 8 bottom of $1,700.10.

For the week, the precious metal contract lost about 2.7% in value, following through with the previous week’s drop of 2.5%.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to our source, spoke on other prevailing macros weighing heavily on gold prices

“The rise in real yields has seen gold under pressure with everyone selling. Although positioning is cleaner, the overall market is still long, and ETF selling negatively affects the market on actual position clean out rather than just speculative sell-off. Which is more worryingly an early sign of a capitulation.”

Bottom Line

Gold traders are not keen on going bullish, at least for the near term, on the bias that rising U.S Treasury yields see investors showing less interest in the yellow metal.

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CURRENCIES

Exchange rate stabilises at N410/$1 as oil price rallies above $65 per barrel

The exchange rate between the Naira and the US Dollar closed at N410/$1 at the Investors and Exporters window on Monday as oil prices hit $65.24 per barrel

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Monday 22nd February 2021: The exchange rate between the Naira and the US Dollar closed at N410/$1 at the Investors and Exporters window, where forex is traded officially.

Naira remained stable on the NAFEX window to stand at N470 to a dollar on Monday, which is the same rate it closed on the previous trading day.

Also, Naira depreciated on the parallel market to close at N480/$1 on Monday, 22nd February 2021. This represents a N2 drop when compared to N478/$1 recorded on Friday, 19th February 2021.

Brent Crude oil price hit a record high as it closed at $65.24 per barrel as Goldman Sach’s projection indicates bullish trades in Q2 2020.

Trading at the official NAFEX window

The exchange rate between the Naira and Dollar at the Investors and Exporters (I&E) window maintained the same rate as recorded on Friday last week to close at N410/$1 on Monday, 22nd February 2021.

  • The opening indicative rate closed at N408.04 to a dollar on Monday. This represents a 43 kobo drop when compared to N407.61 to a dollar that was recorded the previous trading day on Friday, February 19, 2021.
  • An exchange rate of N412 to a dollar was the highest rate during intra-day trading before it closed at N410/$1. It also sold for as low as N389.75/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window declined by 20.8% on Monday, February 22, 2021.
  • According to the data tracked by Themoneymetrics from FMDQ, forex turnover decreased from $66.41 million recorded on Friday, February 19, 2021, to $52.58 million on Monday, February 22, 2021.

Cryptocurrency Watch

  • The largest cryptocurrency in the world, Bitcoin dipped by 4.76% on Monday to stand $54,753.48 as of 11:10pm.
  • This came after the world’s richest man, Elon Musk disclosed that the price of bitcoin and Ethereum seems to be high.
  • Meanwhile, three days ago, the world’s most demanded crypto-asset breached the $1 trillion market capitalisation to become the sixth most-valuable asset worldwide.
  • It is worth noting that, following the directive of the CBN prohibiting regulated financial institutions from dealing with Cryptos, Nigerians have moved towards peer-to-peer transactions trading directly without a third party.
  • According to a recent study seen by Themoneymetrics , the use of Bitcoin for peer-to-peer lending in Nigeria surged by 16% since the CBN directive took effect about 18 days ago

Crude oil prices top $64 per barrel

Crude oil prices picked up again on Monday as Brent Crude gained an additional $2.33 to close at $65.24 per barrel.

  • The increase represents a 3.7% increase when compared to $62.91 per barrel recorded on the previous trading day.
  • The price increase came shortly after Goldman Sach forecasted that oil prices would climb around $70 per barrel in the second quarter of the year.
  • It could also be attributed to the realization that U.S oil production and refineries will take a bit of time to resume their normal level of output after the Texas Freeze knocked out oil refineries.
  • The oil market rallied despite the news that Saudi Arabia and Russia might be on the verge of a disagreement again over output agreement, which the group will deliberate on in March.
  • Meanwhile, Brent closed at $65.24 (+3.7%), WTI closed at $61.49 (+3.8%), Bonny Light at $62.09 (-1.16%), and Natural Gas closed at $2.946 (-0.24%).

Declining external reserve despite bullish oil prices

Nigeria’s external reserve dipped further on Thursday, 18th February 2021, to stand at $35.47 billion.

  • This represents a decline of 0.15% compared to $35.53 billion recorded as of Wednesday, 17th February 2021.
  • Despite rallying oil prices, Nigeria’s external reserve has recorded a steady decline since the 25th of January 2021, losing a sum of $958.1 million in less than a month.
  • It is worth noting that despite the significant increase recorded earlier in January, the current reserve positive is only $99.9 million more than $35.37 billion recorded as of 31st December 2020.
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