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The Traders’ Voice – The final lap

Equities market has traded sideways since then as concerns around FX liquidity continued to dampen investors’ appetite.

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Final lap indeed, what a year it has been! Whew! I am sure the entire world is ready for the year to be over in
hopes that the Coronavirus would be a thing of the past. As we enter the final quarter of this special year, I think
it is safe to say that this year will go down in world’s history as one hell of a year.

Nigeria also celebrated her 60th year of being independent last week and I must say, the road is still very much
far ahead for her but I believe the resilience and optimism of majority of Nigerians will definitely get us to the
promised land one day, ‘we hope’. I can dwell on and list all the negatives in terms of little achievements that
have been made despite all the efforts and time that has been exerted over the last 60 years, but I think I will
rather focus on some good news worth pointing out, and that is the Nigerian equities market. Can someone say, “Amen!!”

The Resurrection…

“After Jesus had said this, He called out in a loud voice, ‘Lazarus, come out!’ The man who had been dead
came out with his hands and feet bound in strips of linen, and his face wrapped in a cloth…” John 11:43-44.
The Nigerian Equities market sustained its bargain hunting momentum last week as it advanced by 2.53% WoW
to close at 26,985.77 points (its highest in seven months). The NSEASI finally returned into positive territory after
shedding 23% YTD in March 2020. The NSEASI YTD returns settled at +0.54% YTD last week (vs.-1.95% YTD
in the previous week). Most people would agree that the recovery in equities is somewhat of a miracle given the
sustained Macroeconomic headwinds that have pressured the equities market since the covid-19 pandemic hit
our shores. But as they say, “The Lord works in mysterious ways”.

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The Nigerian Equities market had an interesting start to the year as the ASI was up 9% YTD as at late January
2020. The NSEASI was also ranked the first on the world equities ranking, trust Nigerians to make noise about
it as this became the selling point for most equities traders. The early rally largely driven by liquidity as local
investors who were unable to invest in the OMO market skewed their attention towards the Bonds and Equities
market.

After we gave ourselves false hope that there is nothing we cannot handle (the Nigerian Survival mentality) and
that covid-19 virus could never survive Nigeria’s weather (can’t imagine I believed this, I guess I was just trying
to be optimistic), we recorded our first case and market went into a risk off sentiment as sell-off seen across all
risk asset, the equities market lost 23% YTD in March 2020.

Nevertheless, we began to see a recovery in May 2020 as the absence of sizable offshore offers gave domestic
investors room to flex their might as locals continued to be better buyers in the bourse. Activity improved further
as offshore investors that were stuck and decided to pick up some stocks on the cheap. Nevertheless, the Equities
market has traded sideways since then as concerns around FX liquidity continued to dampen investors’ appetite.
The bargain hunting has strengthened in recent weeks as the outcome of the September MPC finally gave
investors the clarity, they have been waiting for… looks like the low rates are here to stay. It seems the outcome
of the MPC meeting coupled with the low yield environment in the fixed income market has renewed the PFA’s
appetite in the equity market, as the NSE ASI reappears on the world equities ranking (13th).

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Fundamentals or Liquidity?

Liquidity has played a major role in the global market performance this year, with U.S. equities rallying on the
back of the $3 trillion U.S. monetary stimulus packages and now we are seeing the same liquidity that has piled
up from the OMO maturity repayment finally flowing into equities, which begets the question, “Fundamentals
or Liquidity, which is more sustainable?” Nevertheless, we expect the anticipated liquidity inflow from the OMO
market between now and December (NGN4.1 trillion) to keep the equities market above water.

Where is the money?

Given the foregoing, we are still positive on top-tier banks (GTB & Zenith), while we believe that industrial names
like WAPCO and Telco giant MTN could provide some neat term upside to investors.

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Columnists

Nigerian women need over 50% representation in government by 2023

In Nigeria, there is still a need for Nigerian women to have up to 50% representation in government.

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Women are taking part in the governance and nation-building of their countries. In October 2019, the global participation rate of women at the national level was 24.5% compared to 8% in 2013 which is quite reassuring. However, in Nigeria, there is still a need for Nigerian women to have up to 50% representation in government.

The reason more women are needed in governance is that they have the expertise to aid in achieving a stronger and vibrant democracy. According to Mr Ban Ki-moon, the former Secretary-General of the United Nation, “When we empower women, we empower communities and nations and the entire human communities.”

A good number of women in Nigeria have made a significant impact on governance and nation-building. Historically, once women come together, they can make things happen because they understand their issues and can articulate them from a point of succinct comprehension.

Mrs. Fumilayo Ramson-Kuti was an activist and a political campaigner – 30 years ago, when there was a tax levy on women in Egba land, she coordinated a women’s union group after a long tussle with the colonial administration and traditional rulers.

Dr. Ngozi Okonjo-Iweala is another prominent woman in the global space. She served as Nigeria’s Finance Minister and also as Nigeria’s Foreign Affairs Minister. Currently, she is on the verge of becoming the first female and the first African Director-General of the World Trade Organization (WTO).

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Asides from these two, a lot of women are making waves in society – not only in politics but also in managerial positions and businesses.

Factors that hinder women’s participation in politics

 In 2016, there was a study by McKinsey that revealed that only 5% of women are CEOs of companies, 22% cabinet members, while 24% are elected to official positions in Africa.

More so, in the last election 2019 in Nigeria, there were up to 3000 women candidates across all the parties. However, only 64 women were elected and appointed into political offices. Looking at the figures, there is a clear indication that it is very low and needs to be addressed as the 2023 election approaches.

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Here are the major challenges affecting women’s involvement in politics in Nigeria.

  • Godfathers: In politics, godfatherism is a very big role. For women who are not able to build that network, it becomes a very big issue for them. To avert that, women are advised to create their own network in politics – support one another and assist each other in climbing the ladder, especially for those who are already in government.
  • Raising funds: Election campaigns are very expensive to participate in.
  • Religious factor/Traditional factors: A lot of people still feel women should be seen and not heard, because they are under a man and should be submissive. Cultural & religious barriers still exists, and it prohibits women from fully contributing to governance. The emergence of women as leaders does not need to subjugate their cultural and religious identities. Men & Women need to understand that it is only through joint decision-making and cooperation, that the society can thrive.

Here are what women can do to thrive in politics

For women to have 50% representation in government, here are what is needed.

  • Those already elected must see themselves as a springboard and position themselves strategically, so they can increase the number of women in political offices. It is also important for women to leverage technology and use social media to enable them to build a community of women leaders/activists.
  • Having already announced the date for 2023 election, it is imperative that women start preparing themselves ahead of the election and strategize on how to get more women elected to the government.
  • Finally, having a skill is very crucial for women who want to be community leaders.

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Columnists

Trump or Biden? How the US Presidential election will impact the stock market

A Trump victory will see a stock market bump, as traders buy shares to cover their Put options.

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US stocks are falling and volatility is going to increase as the US election head to a close on November 3rd. However, this is a systematic fall, meaning every stock in every sector is falling. Every sector save for a few healthcare stocks is down – irrespective of earnings. Why would Amazon stocks fall, even as demand is up?  This is a big market “tell” that the market sell-off has nothing to do with fundamentals.

Image 1 shows the Standard & Poor 500 index stocks categorized by sectors and industries.

Another key indicator that shows the market’s hand is the “VIX” – the trading symbol for the CBOE Volatility Index – that measures the implied volatility of the S&P 500 index. The VIX is muted, it’s up slightly – but nowhere near the levels seen in March and July of this year. What this tells us is that the market is less fearful. In other words, this is a planned sale by institutional investors not driven really by COVID-19 or stimulus fears.

Image 2

Why are all sectors in the market falling? The answer is simple; Investors are hedging against a Joe Biden victory in November.

Joe Biden‘s tax plan calls for an across the board tax hike on income, including Capital Gains taxes. This means if you filed as a single, bought the US Stocks in 2016 by buying the Vanguard Total Stock Market Index Investor (VTSMX), your return in 2019 would have been 52.2%. This return would have triggered a capital gains tax of 20%, if your income exceeded $441.451 as a single filer.

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Image 3

Donald Trump on the other hand will tax long-term capital gain at 39.6$% on income above $1m. The maths is simple, investors that have made money in the stock market under the Trump tax cuts have an incentive to sell their stocks today or buy a Put option – to take in cash today and wait.

If Biden wins, they pay Capital gains taxes at the lower 20%; if Trump wins, they already have banked on their cash.

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Can you see the opportunity?

If Trump wins, these investors have to buy back those shares. Thus, a Trump victory and the Republican Party retaining the Senate will see a stock market bump, as traders buy shares to cover their Put options.

This is a simple play – if you think Trump will win, buy the market and go bullish.

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Columnists

October PMI reveals rebound in economic activities

Manufacturing PMI has remained below 50 index points for the past six consecutive months.

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Manufacturing: Activity levels pick up albeit readings still below water

According to the Purchasing Managers Index (PMI) data released by the Central Bank of Nigeria (CBN) for the month of October, activity levels in the manufacturing and nonmanufacturing sectors strengthened even as readings remained below 50 index points. Specifically, the manufacturing PMI expanded to 49.4 in October from 46.9 in September, indicating slower contraction compared to the prior five months. Similarly, the nonmanufacturing PMI strengthened to 46.8 in October from 41.9 in September, halting two months of consecutive contraction in the index. That said, we note that Manufacturing PMI has remained below 50 index points for the past six consecutive months while NonManfacturing PMI has been below 50 index points for the past seven consecutive months.

Across the key indices in the manufacturing PMI, save for Supplier delivery time (-1.7) which recorded some deterioration, the remaining four indices in the manufacturing sector improved in October; Raw materials/WIP Inventory (+3.2), New orders (+4.8), Production level (+2.7) and Employment level (+1.9). We think the deterioration in Supplier delivery time reflects the impact of the nationwide unrest and peaceful protests on logistics and distribution channels of manufacturing firms. Furthermore, we note that while Employment
level and Raw material inventories improved in October, they remain below the 50-point mark which reflects weak labour employment and FX illiquidity challenges impacting ability to import critical raw materials. The data further revealed that, of the 14 surveyed subsectors in the manufacturing sector, six (compared to four in September) reported growth while 8 (compared to ten in September) contracted.

For non-manufacturing PMI, all four of the key metrics recorded improvement albeit they all remained below the 50-point mark. Across all the indices; Business Activity (+5.0), Level of new orders (+8.3), Employment level (+2.6) and Inventory level (+3.2) showed decent improvements. We think the decent recovery in Non-manufacturing PMI was driven by sustained recovery in activities of service-based organisations in the face of reduced covid19 restrictions.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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