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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.

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.

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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.

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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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Stock Market

DANGOTE CEMENT, GUINNESS drops lower, as investors lose N75.07 billion

Nigerian bourse recorded its second trading loss for the week.

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The Nigerian Stock Exchange on Tuesday closed bearish. The All Share Index dropped by 0.58% to close at 24,883.70 basis points as against -0.06% drop recorded on Monday.

Its Year-to-Date (YTD) returns currently stands at -7.30%. Nigerian bourse’s market capitalization presently stands at N12,981 trillion. Investors’ losses recorded today stood at N75.07 billion.

Trading volume turnover closed positive as volume moved up by +17.84% as against +4.90% uptick recorded in the previous session. ACCESS, FIDELITYBK, and GUARANTY were the most active to boost market turnover.

Market breadth closed negative as CADBURY led 16 Gainers as against 17 Losers topped by PRESTIGE.

Top gainers

  • CADBURY up 6.82% to close at N7.05
  • NB up 6.25% to close at N34
  • ARDOVA up 4.94% to close at N12.75
  • VALUEFUND up 1.37% to close at N115.05
  • GUARANTY up 1.02% to close at N24.8

Top losers

  • IKEJAHOTEL down 9.82% to close at N1.01
  • MANSARD down 8.23% to close at N1.45
  • DANGCEM down 4.09% to close at N136
  • GUINNESS down 3.33% to close at N14.5
  • UCAP down 3.09% to close at N3.14

Outlook

Nigerian bourse recorded its second trading loss for the week, triggered by high selling pressures notable in DANGCEM and GUINNESS.

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Nairametrics, however, recommend you seek the counsel of a certified financial advisor when buying stocks.

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Commodities

Gold price loses $80 following Russia’s COVID-19 vaccine approval

This marks gold’s steepest daily decline in nearly five months.

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ETF, stocks, shares, investment, equity,Gold loses some shine on hopes for COVID-19 vaccines

Gold futures has lost about  5% or $80 in less than four hours, at the London trading session this afternoon.

Gold futures fell as low as $1,950 per ounce, $80 differential from its opening price of $2,030

This marks gold’s steepest daily decline in nearly five months, even as global stocks went bullish following news that Russia’s COVID-19 vaccine has obtained regulatory approval.

READ MORE: Cocoa prices melt lower as COVID-19 weakens demand 

The COVID-19 vaccine approval by Russia was met with some skepticism by experts.

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More details shortly…

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Debt Securities

DMO offers N150 billion worth of FGN Bonds for subscription

FGN Bonds are backed by the full faith and credit of the Federal Government of Nigeria.

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Debt Management Office resumes FGN savings bond offer on August 10, Eurobonds, Patience Oniha, DMO, External debt servicing

The Federal Government on Tuesday, 11th August 2020, through the Debt Management Office (DMO), offered for subscription Federal Government Bonds (FGN Bonds) valued at N150 billion.

The FGN bonds are listed in four tranches that include:

  • N25,000,000,000 – 12.50% FGN JAN 2026 (10-Yr Re-opening)
  • N40,000,000,000 – 12.50% FGN MAR 2035 (15-Yr Re-opening)
  • N45,000,000,000 – 9.80% FGN JUL 2045 (25-Yr Re-opening)
  • N40,000,000,000 – 12.98% FGN MAR 2050 (30-Yr Re-opening)*

READ: UBA reports a 13.3% profit increase in audited FY 2019 financial statement

Auction Date: August 19, 2020

Settlement Date: August 21, 2020

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Summary Of The Offer

Issuer: Federal Government of Nigeria (“FGN”)

Units Of Sale: N1,000 per unit subject to a minimum subscription of N10,000 and in multiples of N1,000 thereafter.

Interest rate: For Re-openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus accrued interest from the original issue date.

READ ALSO: Nigeria’s Eurobond yield hit 12.8% as investors flee emerging markets

Interest payment: Payable semi-annually.

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Redemption: Bullet repayment on the maturity date.

Status:

  1. Qualifies as securities in which trustees can invest under the Trustee Investment Act
  2. Qualifies as Government securities within the meaning of Company Income Tax Act (“CITA”) and Personal Income Tax Act (“PITA”) for Tax Exemption for Pension Funds amongst other investors
  3. Listed on the Nigerian Stock Exchange
  4. All FGN Bonds qualify as liquid assets for liquidity ratio calculation for banks

Security: FGN Bonds are backed by the full faith and credit of the Federal Government of Nigeria and are charged upon the general assets of Nigeria

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Understanding Bonds: A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental).

A bond could be thought of as an I.O.U. between the lender and the borrower that includes the details of the loan and its payments.

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A bond has an end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments that will be made by the borrower.

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