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Mixed trends trail Nigerian markets

Funding rates to hover around current levels next week barring any significant flows.

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Global stocks tumble on "corona" sell off, BLOODY WEEKS: Coronavirus cost investors N1 trillion, triggers devaluation fears, Global Market Summary on Tuesday, Analysis: The economy is crashing, avoid falling knives,, Debt crisis looms in emerging markets,Debt crisis looms in emerging markets

It appears that consumers’ and investors’ confidence are gradually been restored across major markets across the globe. Below are the performances of global markets:

Macro Update
In a stunning turn of events, the U.S, largest economy, added jobs in May after a record-high number, the previous month. The jobless rate fell to 13.3% from 14.7% in April.

In addition, there have been surveys indicating that consumer confidence, manufacturing and services industries were stabilizing.

Despite last May’s surprise increase, payrolls are nearly 20 million below their pre-COVID-19 level. However, this could indicate that the post-pandemic recovery may not be as drawn out as feared.

Following over 2-months of lockdown as a result of the pandemic, the Federal Government released guidelines of the second phase of the lockdown easing.

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The second phase of the lockdown easing is to last 4 weeks spanning from June 2nd – June 29th and will see airlines begin operating from June 21. While the curfew is still in effect, it has been relaxed and is now in effect from 10 p.m. to 4 a.m.

In what appears to be a bid to address the revenue situation that plagues the country as a result of the pandemic, the country has launched its first licensing round for marginal oilfields in nearly 20 years.

Marginal fields are smaller oil blocks that are typically developed by indigenous companies. The Federal Government revoked the existing licenses on the fields so that they could be put into the new licensing round; additionally, judges in Lagos have blocked the government’s efforts to revoke two existing oilfield licenses.

In a recently concluded OPEC+ meeting, the bloc agreed to extend the supply cut by an additional month, bringing the total length of the cuts to 4 months.

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It appears the cuts have brought some stability to the oil markets as oil prices gained 48% during its first month. As at print time, oil finally crossed the $40/bbl point ($40.08/bbl) for the first time since March.

Money Markets
Funding rates expanded significantly last week on the back of the c.N600 billion retail FX funding and CRR Debit.

OBB and Overnight rates rose by 1340 bps and 1380 bps to close the week at 15.60% and 16.70% from 2.20% and 2.90% respectively w/w. Market liquidity is estimated to be c.N150 billion according to market sources.

Experts expect funding rates to hover around current levels next week barring any significant flows.

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Stanbic IBTC

Treasury Bills

The Treasury Bills market started the week on a relatively quiet note with minimal activity witnessed across board due to the unattractive NTB yields. Hence, activity in the space maintained its relatively weak trend for the rest of the week on the back of the limited market supply.

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According to experts in Commercio Partner, a similar trend in the Treasury Bills market is expected next week as attention skews towards the PMA.

Bond Market
The Bond market started the week on a relatively quiet note with minimal volumes seen across as most of the attention was skewed towards the Sukuk bond offering.

Nevertheless, activity began to improve slightly throughout the week as liquidity continues to spur a bullish bias in the market. In all yields decline by 9 bps w/w.

FX Market
Nigeria’s FX reserve declined by 0.54%, USD$17.09 million WoW to $USD36.58 billion, its first decline in weeks. Consequently, the naira depreciated against the US Dollars, pared by 0.04% week-on-week to $1/₦386.50 at the I&E window.

At the parallel market, the currency depreciated against the US Dollars, Pound Sterling & the Euro to $1/₦460, £1/₦545 & €1/₦472 from $1/₦450, £1/₦540 & €1/₦470, respectively in the previous week.

READ ALSO: Pension Fund Managers dump Nigerian Treasury Bills

Equities Market
Last week the benchmark index declined by 0.98% to 25,020.72 points. Featuring on the gainers’ chart for the week are SKYAVN (+50.83%), JAPAULOIL (+50.00%), UAC-PROP (+20.00%) and ABCTRANS (+17.14%).

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On the other hand, AFROMEDIA (-23.08%), UACN (-13.89%), FIDSON (-12.94%), PZ (-12.73%), and CADBURY (-11.56%) were listed on the laggard’s chart for the week.

The Exchange witnessed 3 sessions of gains in all the trading session for the week. Hence, YTD return came in at -6.79% from -5.86% in the previous week.

Market Capitalization settled at NGN13.05 billion. The equity market breadth closed negative at 0.67x (compared to 1.55x recorded last week) as the market recorded thirty-nine (39) advancers in contrast to twenty-six (26) decliners in the week.

In the coming week, the experts expect to see continued profit-taking activities on the exchange.

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper.The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference.The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

1 Comment

1 Comment

  1. Oyetunji Kuforiji

    June 7, 2020 at 3:00 pm

    The market is still very volatile. New information into the market will push investors from equity to Bond market vice versa. Any long term speculation on forex market should consider the United States of America election in November not only for Naira/$ transactions but also for the cross rates. However as Nigeria continue to access foreign loans it should have positive impact on the value of the naira in the Fx market.

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Cryptocurrency

Polkadot fast-rising Crypto, jumps past XRP

Polkadot has comfortably surpassed XRP in terms of market value following a massive gain of 62% in barely 7 days.

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Polkadot

There have been some big shakers in the crypto-verse amid recent sell-offs seen in the fast ever-changing financial market and Polkadot is among them.

According to figures from a leading analytics firm, Coinmarketcap, Polkadot has comfortably surpassed XRP in terms of market value following a massive gain of 62% in barely 7 days. This makes it the fourth-biggest crypto asset in the crypto market.

What you should know

  • At the time of writing this report, Polkadot traded at $14.82 with a daily trading volume of $6 Billion. Polkadot is up 4.85% for the day.
  • The fast-rising crypto-asset presently has a market value of around $13.3 Billion. It has a circulating supply of 900,576,862 DOT coins and the maximum supply is not available.
  • In addition, XRP, conversely, has been down 10% for the week as XRP bulls had challenges taking the cross-border transfer token above $0.30. Its market cap is currently just below DOT’s at $12.7 Billion.

Polkadot’s native DOT token serves three clear purposes: providing network governance and operations, and creating parallel chains by bonding. Its founders are Dr. Gavin Wood, Peter Czaban, and Robert Habermeier

The fourth most valuable crypto asset is an open-source multichain protocol that enables the cross-chain transfer of any data or asset types, cryptocurrencies, thereby expanding blockchains interoperable with each other.

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The Polkadot protocol connects private and public chains, oracles future technologies and permission-less networks, allowing such independent networks to share information and transactions through the Polkadot relay chain.

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Market Views

Bitcoin, Gold, leading Stocks tumble on strong U.S dollar

The U.S dollar index gained 0.6% on the day to settle at 90.77.

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Crypto, Investors flock to US dollar, Gold, Bitcoin, as Global Stocks record heavy sell-offs, Twitter Poll: Bitcoin price expected to reach $100,000 by 2021, cybercriminals, What it will take Bitcoin to hit $100,000?

The dollar was fired up at the last trading session of the week crushing its major currency rivals, Bitcoin, Gold, and leading global Stocks.

The U.S dollar retained its safe-haven status on the account of the U.S Dollar Index settled remarkably higher than a basket of six other global major currencies.

The U.S dollar index gained 0.6% on the day to settle at 90.77.

What this means

Investors are piling to the U.S dollar after receiving worrying U.S economic data. Retail sales in the world’s largest economy were off 0.7% last month, the third straight drop.

  • Such upsides seen in the greenback’s value saw gold at the expense of a charging dollar whose strength astonished metal traders, saw gold futures losing as much as 1.16% to settle at 1,829.90/ounce
  • Also at press time the flagship crypto asset, Bitcoin traded at $35,756.99 with a daily trading volume of $70 Billion.
  • Bitcoin is down 7.38% for the day.

Also, the world’s biggest stock market by market volume and liquidity suffered heavy losses, as data showed the Dow Jones Industrial Average plunged by 0.57% to settle at 30,814.26 index points, the S&P 500 lost about 0.72% to settle at 3,768.25 and the Nasdaq Composite fell by 0.87% to close at 12,998.50 index points.

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The greenback was an outlier at the last trading session despite drops seen in U.S bond yields associated with the benchmark 10-year U.S. note, whose resurgence in the previous week had been the catalyst for the U.S dollar comeback.

What they are saying

Milan Cutkovic, Market Analyst at Axi, in an explanatory note to Nairametrics, spoke on fundamentals supporting the rebound of the U.S dollar;

  • “Many investors continue to stand on the side lines. President-elect Joe Biden unveiled his US$1.9 trillion stimulus plan. There were no major surprises, and a lot of it was already priced in.
  • “Investors are now focused on how quickly the Biden administration can implement their plans and support the ailing US economy. Although Biden will be inaugurated on Wednesday, the second impeachment of Donald Trump might overshadow the first few weeks of his term.
  • “Investors are also increasingly confronted with the reality that the pandemic is still far from being under control, despite the significant progress that was made in the past few months, and several COVID-19 vaccines already on the market.”

Bottom line

Investors are also increasingly confronted with the reality that the pandemic is still far from being under control, thereby flocking back to the safe-haven currency despite the significant progress that was made in the past few months, and several COVID-19 vaccines already on the market.

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Debt Securities

Interest rates will remain low until the end of H1 2021 – Meristem Securities

Meristem Securities has argued that interest rates will remain low until, at least, the end of H1 2021.

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Why Emefiele’s interest rate policy is ‘great’

Meristem Securities has asserted that interest rates will remain low until, at least, the end of H1 2021.

This statement was made at the recently held webinar on Global Economy and Outlook, which the company themed: Bracing for a Different Future.

Although the company acknowledged that there is mounting pressure for upward movement in yields from several stakeholders, it appears the company concurs nothing concrete is in sight.

This line of reasoning seems to have influenced their decision to advise investors to move away from Treasury instruments.

What they are saying

Meristem advises that:

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  • “Buy and hold strategy investors seeking to generate above average returns should move away from risk free Treasury instruments and focus on investment grade commercial papers and bonds which satisfy investment objectives.”
  • “Active traders with higher risk appetite are advised to focus on high-yield short duration instruments, which would be re-invested into a higher yield environment should rate reversals occur.”

The advice regarding shunning Treasury instruments appears to be in order, considering that treasury bill rate has been declining, with the latest figure — November 2020 — 0.03% as per the CBN monthly interest rate data.

Further checks from the Debt Management Office website, indicates that the latest figures for Eurobonds and Diaspora bond fall short of the fixed yield at issue for all the different categories of bonds in issue.

What you should know

Latest figures from the CBN’s monthly interest rate indicate that:

  • Treasury bill rate has been on a steady decline for six months, down to 0.03% since the last rise (2.47%) in May 2020.
  • Fixed deposit rates (one, three, six and twelve months) have also been declining – the latest figures for these indicate that in November 2020, one-month deposit rate was 1.92%, 2.9% for three months, 2.84% for six months, and 4.89% for 12 months.
  • Compared with the corresponding period in 2019, the figures indicate that these rates fell by 75%, 66%, 71% and 49% respectively.

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