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Dangote, MTN, GTbank hit a home run as Nigeria’s bourse sustains bullish momentum

Nigeria’s bourse gained N47.9 billion in second trading day of June over share price appreciation in blue-chip companies.

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Nigerian stock exchange, All share index, Nigerian bourse, Investors, Bulls gather momentum ASI up 0.48%, gained N55.3 billion, Dangote ,MTN & Gtbank hit a home run as Nigeria’s bourse continues bullish momentum

Investors at Nigeria’s bourse gained N47.9 billion in second trading day of June over share price appreciation in blue-chip companies. The market capitalization which opened the month at N13.168 trillion inched higher by 0.27 % to close at N13.241 trillion.

Also, the NSE All-Share Index rose by 67.28 points or 0.27% to close at 25,383.43 basis points compared with 25,316.15 points it closed yesterday.

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Thus, Year-to-Date losses moderated to 5.43% Market activity closed strong compared to the previous trading session, as total volume and value improved by 49.18% and 128.03% to close at 377.88 million units and N6.05 billion respectively.

Nigerian Breweries was the most traded stock by volume at 50.4 million units, valued at N2.22 billion.

Market breadth finished flat with 20 gainers led by NEIMETH (+9.84%), while 18 stock declined, topped by UBN (-8.21%).

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Performance across sectors under review was mixed as two indices gained, two lost, while the oil and gas index remained unchanged. The Insurance index (+0.44 %) led gainers following price appreciation in CHIPLC (+8.33%) and AIICO (+3.77%).

The industrial (+0.20%) indices trailed due to buying interest in DANGCEMENT (+1.44%), while the Consumer Goods & Banking index shed -0.13 % and -0.09% on the back of price decline in UACN (-6.67%), UBN (-8.21%) and ACCESS BANK (-1.39%).

(READ MORE: Dangote, Cadbury, Flourmills regain bullish momentum on Nigerian Stock Exchange)

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Top gainers 

SKYAVN up 9.52% to close at N2.07,GUARANTY up 2.24% to close at N25.1,NASCON up 1.80% to close at N11.3,DANGCEM up 1.44% to close at N141,MTNN up 0.43% to close at N116.5

investors, Bulls gain momentum, as stimulus package lifts global financial markets, Bulls boost global financial market, gold hits 7 years high, Dangote, Tier-1 banks lead the bulls to close Nigerian stock market green, Dangote ,MTN & Gtbank hit a home run as Nigeria’s bourse continues bullish momentum

Top losers 

UBN down 8.21% to close at N6.15,UACN down 6.67% to close at N8.4,MAYBAKER down 5.33% to close at N3.2,PZ down 3.64% to close at N5.3,WAPCO down 1.72% to close at N11.45

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Outlook 

Blue chip kept the momentum has some stocks closed flat today, Nairametrics envisage cautious buying as market liquidity remains a bit thin.

 

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Patricia

Olumide Adesina is a French-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment Trading and analyzing Financial Markets. A member of the Chartered Financial Analyst Society. Financial Market; Yale University, Behavioral Finance; Duke University. You can follow Olumide on twitter @tokunboadesina or email [email protected]

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Commodities

Gold shines on as investors rush to safe haven assets

Spot gold was up 0.8%, to trade at $1,811 by 6.20 am Nigerian time.

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Gold, Gold prices tick up as President Trump decides on China today, Gold Prices Surges, Protests Erupts In America, Gold Down Over Increased Investor Confidence in Economic Recovery, Gold futures reach two months high over rising Covid-19 cases  

Gold pushed past the $1,800 mark yesterday, as bulls controlled the precious metal’s surge to spur its prices to new nine-year high.

The real-time barometer for bullion prices showed that spot gold was up 0.8%, to trade at $1,811 by 6.20 am Nigerian time.

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In addition, gold bulls had their momentum boosted as data showed that the world’s biggest economy had added a million cases of COVID-19 infections in just 30 days, while nations spared of the virus’ onslaught like Sweden, recorded surging death rates.

“Gold is roaring higher as a number of uncertainties to the outlook persist and as the dollar slides,” said Ed Moya at New York-based online trading platform OANDA.

“The Fed has acknowledged that corporate bond-buying could slow if market conditions improve further. But the intensifying wave of the virus in the U.S. will likely see that not happen anytime soon,” Moya said, reinforcing expectations that the central bank’s support for the American economy and markets will continue, weighing on the dollar and boosting gold.

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Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics, explained the fundamentals on gold. He said:

“But other gold buyers are looking through the run of robust US data thinking that mid-June was a sweet spot in the high-frequency metrics, and things will go downhill from here due to COVID-19 resurgence and particularly as investors anticipate further policy stimulus.

“Specifically, gold still appeared to gain traction on carryover buying from comments made by regional Fed Presidents Bostic and Daly the previous day, cautioning that the economy may be plateauing.

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“We could see some profit-taking set in, but with the dollar turning weaker overnight, we could see an enduring bid hold in around $1805 as the primary motivator for higher gold prices is concerns around the COVID-19.”

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FEATURED

How fund managers can help in period of low yield

With inflation holding steady, the low yields end up translating to negative returns.

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It is often said that he who must find gold, must dig deeper because such is not found on the surface. With the current trends in interest rate, yield has become like gold, and those that must find it, should dig deeper than they have done before. It is no longer news that yield in traditional asset classes is approaching historically low levels. Indeed, yields are so low that yielder hunters are literally stuck. In one of my last pieces, I noted that the low yield had driven pension funds to the point of abandoning treasury bills as an asset class. The picture gets scarier and disheartening when viewed in real terms. With inflation holding steady, the low yields end up translating to negative returns when discounted for inflation.

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Source: CBN

Now that Treasury bills seem to be out of the question due to sub-zero yields, what can investors turn to? Here are a few things that investors could think of doing;

Invest in Money Market Funds: Money market funds have been the darling asset class for most Nigerians, due to their conservative nature and the fact that money market funds seem to be much easier to understand. The present low yield in the World market is also affecting money market funds but they still remain much higher than what is obtainable from Treasury Bills.  Unfortunately, a great majority of fund managers do not have the yield of their money market funds on display when I visited their websites, below is a list of the prevailing money market yields in Nigeria for those that could be gleaned from the various website:

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It may pay to shop around for yield as different funds present with different yields, as can be seen from the table above.

READ ALSO: SEC’s new rules on collective investment schemes: A step in the right direction

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Fund Managers to the Rescue: One of the implications, if not the major implication of the ultra-low interest rate is that investors in yield driven asset classes, like money market funds, will either make minimal returns or no returns at all, especially when inflation is factored in. Unfortunately, most of these money market funds pay fees to the fund managers. To help the situation, it is time for fund managers to reduce or waive some of the fixed fees they charge investors like management fees. Investors should, therefore, ask fund managers for a renegotiation of the fee structure in such a way that the burden of low-interest rate is shared between the fund managers and the investors. Fund managers in places like the US are already doing this.

Loss Carryforward Provisions: Another way that investors can manage this situation is for them to ask fund managers to insert loss carry-forward provisions into the mutual fund agreement or prospectus. A loss carryforward provision is one which states that the fund manager does not get paid any incentive fee unless and until the fund attains its last known highest asset value. By having loss carryforward provisions, investors are afforded the time to recoup on losses before being charged further incentive fees.

Explore economic research data from Nairametrics on Nairalytics

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Look for High Dividend Yield Stocks: Though stock investment remains riskier than money market funds and fixed income fund investments, in a low yield environment, it may pay to look for and invest in high dividend stocks that have a history of regular and consistent dividend payments.

Warning: Nothing in this article should be taken as investment advice and the author should not be held liable for using it as such.

 

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Currencies

Naira weakens as forex turnover falls by 88%  

The opening indicative rate was N387.32 to a dollar on Wednesday.

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Forex turnover fell by 88% on Wednesday at the I&E window weakening the exchange rate to N386.76/$1. The exchange rate at the black market however remained flat at N461/$1 for the third consecutive day this week.  

NAFEX: The naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday,  closing at N386.75 to a dollar, compared to the N386.50 that was reported on Tuesday, July 7, representing a 25 kobo drop. This is as traders continue to mull over CBN’s adjustment of the exchange rate at the SMIS window. The opening indicative rate was N387.32 to a dollar on Wednesday. This represents a 14 kobo drop when compared to the N387.18 to a dollar that was recorded on Tuesday.       

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Parallel Market: At the black market where forex is traded unofficially, the naira remained stable as it closed at N461 to a dollar on Wednesday which was the same rate that it exchanged on Tuesday.   

READ MORE: Unify exchange rates to foster economic growth – NISER 

Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS and the NAFEX (I&E window). Nairametrics reported last week that the government has set plans in motion to unify the multiple exchange rates in line with requirements from the World Bank. Nigeria is seeking a world bank loan of up to $3 billion.     

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Forex Turnover    

Meanwhile, forex turnover at the Investor and Exporters (I&E) window recorded a decline on Wednesday, July 8, 2020, as it dropped by 88.4% day on day, a huge decline from the figure that it achieved on Tuesday at the foreign exchange market. This is according to data from the FMDQOTC, an exchange where forex is traded by foreign investors and exporters.       

According to the data tracked by Nairametrics, forex turnover decreasedfrom $103.37million on Tuesday, July 7, 2020, to $11.96million on Wednesday, July 8, 2020, representing an 88.4% drop on a day-to-day basis. This is a reversal from the decent turnover that was recorded the previous day and is a far cry from the $200 million mark that was achieved in January and last week.  

Rate Adjustment  

Nairametrics reported on Wednesday that the CBN official rate has been adjusted from N360 to a dollar to N381 to a dollar as reflected on the website of the FMDQ.  However, the official rate quoted on the website of the CBN remains at N360/$1.  

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According to Reuters, “the naira eased 5.5% on the official market on Tuesday, after the central bank sold dollars to lenders at a lower rate, bowing to pressure from international lenders to unify its multiple exchange rates.” Reuters also reported “the naira eased to 380.50 in off-market trades, from 360.50 close on Monday” quoting sources from traders.  

Nairametrics cannot confirm if the latest adjustment is reflective of the SMIS rates or if the central bank has now taken a bold step towards unification and adjusted its official rate. Reuters claims it’s a move to “unify the exchange rate”.  

Explore economic research data from Nairametrics on Nairalytics

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What this means: Unifying the Naira around the NAFEX rate is effectively another round of devaluation. If this is carried out and forex liquidity improves, then it could lead to an exchange rate strengthen in the parallel market just like it occurred in 2017.  

The parallel market rate is currently N461/$1 and could converge to the NAFEX rate meaning those who bought above the NAFEX rate could lose money if they sell.  

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