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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.

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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.

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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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.

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.

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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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Currencies

Exchange rate remains flat, currency traders resume operations after curfew is relaxed

At the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N463/$1 on Monday.

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Exchange rate remains flat, currency traders resume operations after curfew is relaxed

Nigeria’s exchange rate at the NAFEX window continued to remain stable against the dollar to close at N386/$1 during intraday trading on Monday, October 26.

Also, the naira maintained its stability against the dollar, closing at N463/$1 at the parallel market on Monday, October 26, 2020, as currency traders resume business activities after state governments relaxed the curfew initially imposed to curtail the widespread violence that followed the hijacked #EndSARS protests.

READ: Naira maintains stability in forex markets, dollar supply improves despite curfew

This is also as businesses shut down due to the outbreak of violence in Lagos and some parts of the country during the protests against the special anti-robbery unit (SARS) and police brutality by the Nigerian youth.

Explore Data on the Nairametrics Research Website

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Parallel market: According to information from Abokifx – a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N463/$1 on Monday. This was the same rate that it exchanged for on Friday, October 23.

READ: Exchange rate maintains stability as BDCs expect another dollar supply from CBN

  • The local currency had strengthened by about 7.8% within the one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
  • The CBN has sold over $500 million to BDCs since they resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
  • However, the exchange rate against the dollar has remained volatile after the initial gains made, following the CBN’s resumption of sales of dollars to the BDCs.
  • The President of the Association of Bureau De Change Operators, Aminu Gwadebe, said he expects the impact of the extra liquidity in the market to be gradual.
  • Despite the drop in speculative buying of foreign exchange, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.

READ: Naira maintains stability at forex markets as dollar supply rise by 57%

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NAFEX: The Naira remained stable against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N386/$1.

  • This was the same rate that it exchanged for on Friday, October 23.
  • The opening indicative rate was N386.29 to a dollar on Monday. This represents a 29 kobo drop when compared to the N386 that was recorded on Friday.
  • The N393.11 to a dollar is the highest rate during intraday trading before it closed at N386 to a dollar. It also sold for as low as N382/$1 during intraday trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window declined significantly by 81.14% on Monday, October 26, 2020.

  • According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $197.42 million on Friday, October 23, 2020, to $37.23 million on Monday, October 26, 2020.
  • The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
  • The drop in dollar supply after the previous trading day’s huge increase, reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
  • As part of the measure to check forex abuse and check illegal transactions, the CBN last month directed the freezing of accounts of about 38 companies.
  • The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
  • Total forex trading at the NAFEX window in the month of August was about $857 million, compared to $937 million in July.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.

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Cryptocurrency

Bitcoin Whale transfers $1.1 billion worth of crypto for $3.58

A Whale is said to have moved 88,857 BTC, worth roughly $1.15 billion for a fee of only 0.00027847 BTC.

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Bitcoin Whale transfers $1.1 billion worth of crypto for $3.58

Big whales are definitely up to something, with the prevailing price seen at the world’s flagship crypto.

As Bitcoin’s price trades above $13,000, an unknown Bitcoin whale moved more than $1 billion worth of cryptos.

According to on-chain data Blockchain, the said whale moved 88,857 BTC — worth roughly $1.15 billion — for a fee of only 0.00027847 BTC, or $3.58 at the time of writing. The coins were confirmed in block 654,364 on Oct. 26.

READ: Two Bitcoin whales transfer 4,503 BTC, as Bitcoin stays above $11,400

What you should know

  • Bitcoin, at the time of this publication, traded at $13,085.43.
  • With a daily trading volume of $21.4 billion, BTC price is down -0.1% in the last 24 hours.
  • It has a circulating supply of 19 million coins and a max supply of 21 million coins.

READ: Crypto: REN, LEND and KNC emerge best performing DeFi assets

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That said, it’s critical to note these large entities are on record highs amid last week’s price ascension. Statistics obtained from BitcoinCharts revealed that Bitcoin whale addresses actually control a much higher 7,902,469 BTC, or 42% of the total supply.

Explore Data on the Nairametrics Research Website

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  • That brings an affirmative bias that these large entities’ movements are trajectory to price movements at unprecedented levels.
    This is an indication that more high-net-worth individuals are entering the space to invest in Bitcoin, in expectation of $BTC price appreciation.
  • Bitcoin accumulation has been on a constant upwards trend for months.
  • 2.6M $BTC (14% of supply) are currently held in accumulation addresses.

READ: Large entity moves Bitcoins valued $244 million

What this means

Nairametrics believes the increased buying pressures by notable institutional brands are partly responsible for the non-dilutable crypto recent highs. While it is difficult to predict market movements, BTC whales have shown historically that they often determine the BTC trend.

What this means from a macro level is that the increase in the number of these large entities can be considered bullish.

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Market Views

Biggest IPO: World’s biggest Fintech plans to raise $34 billion 

Ant Group has begun the process of a concurrent initial public offering in what could mark one of the biggest IPOs of 2020.

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Biggest IPO: World's biggest Fintech plans to raise $34 billion 

The world’s payment juggernaut, Ant Group, is hoping to raise $34.5 billion in its dual initial public offering (IPO) after setting the price for its shares today, making it the biggest listing of all in modern history, in a report credited to CNBC news.

The Chinese financial powerhouse had earlier disclosed previously that it would divide its stock issuance equally across Chinese major stock exchanges, which include Shanghai and Hong Kong, issuing 1.67 billion new shares at each of those exchanges.

READ: Square buys $50 million worth of Bitcoins

READ: Airtel announces share price today as pre-IPO interest hits $200 million

READ: This report explains why Nigerians are bent on leaving the country

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Ant Group’s Shanghai-listed shares will be quoted at 68.8 yuan each. The issuing of 1.67 billion shares would raise 114.94 billion yuan or $17.23 billion.

  • The Hong Kong-listed shares have been priced at 80 Hong Kong dollars each, raising 133.65 billion Hong Kong dollars or $17.24 billion.
  • The listing would produce a return of at least $34.5 billion, as the figure could go higher if the so-called over-allotment option is exercised, depending on demand.
  • It would make it the largest initial public offer of recent memory, putting it ahead of previous record-holder Saudi Aramco, which raised about $29 billion.

READ: MTN may rake in $600 million from Jumia’s planned listing

READ: Jack Ma’s fintech firm is set for IPO, signalling prospects for Nigerian fintechs

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READ: Gold futures drops to $1727.80 as America, China tension deepens

What you should know

Ant Group, formerly known as Ant Financial and Alipay, is an affiliate company of the popularly known e-commerce company Alibaba.

  • Ant Group remains the world’s most valuable FinTech company, and most valuable unicorn company, with a target valuation of over US$280 billion.
  • The group owns China’s largest digital payment platform, Alipay, which serves over one billion users and 80 million merchants, with total payment volume (TPV) transaction reaching RMB118 trillion in June 2020.

Explore Data on the Nairametrics Research Website

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