Investors in the Nigerian Stock market are surely having good return amid prevailing macro disrupting global financial market
What we know: Data retrieved from Bloomberg terminal revealed that the Nigerian Stock Index ranked third globally with respect to stock index performances. Consequently, the YTD performance improved to stand at 13.43%.
Just in the month of October alone, investors made a gain of about N1.934 trillion as the Nigerian bourse recorded its best monthly gain since 2018.
Emmanuel Orji, an Emerging market/Fixed income trader in a phone chat to Nairametrics, gave detailed insights into why it seems the Nigerian Stock Market is receiving a significant amount of cash flows in relation to low yields prevailing in the Nigerian debt market;
“It’s no surprise seeing the Nigerian equities market among the top three best performing index year to date after the outlier performance we had in October.
“The NSEASI was up 13.79% MTD in October, its biggest monthly gain since January 2018, which was largely driven by the robust system liquidity coupled with low yields at the fixed income space.
“Aside from the massive liquidity inflow in October (c.NGN1.7 trillion from OMO maturity repayment and coupon payment), the reduced supply at the October Bond auction coupled with the closing rate of 0.98% (1-yr paper) at the NTB auction further strengthen the bullish momentum,” Orji said.
Abiodun Keripe, Managing Director, Afrinvest Research in an exclusive interview with Nairametrics also spoke on key macros boosting the sub-Saharan Stock Exchange.
Keripe said, “Nigeria now ranks as the third best-performing stock market in the world out of a basket of 93 indices tracked by Bloomberg. This performance is majorly driven by local investors given the low yield environment and the continued, albeit slow-paced, and uneven rebound in economic activities which has bolstered the third-quarter earnings of major Corporates on the NSE.
“This performance is remarkable in the context of rising concerns over a second wave COVID-19 and prospects of a weaker external position for the Nigerian economy.
“It is interesting to see that stock prices have recovered to the pre-COVID-19 levels within a short duration while external conditions remain fragile.
“The CBN is yet out of the FX conundrum and lower-for-long oil prices remain a key concern.
“We expect strong Naira liquidity to keep fueling equities, even as an additional 1% allocation from the PFAs can lift stocks higher. However, we note that the market may be heating up ahead of a strong rebound in the general economy.”
The bottom line: The low yield environment and other market conditions prevailing in the Nigerian economy had triggered significant buying interest in Nigerian Stocks at record levels despite the seeming disconnection with strengthened geopolitical uncertainty and the resurging COVID-19 virus.
Why Bitcoin still looks like a bargain
With prices exceeding $18,000 for the first time since 2017, BTC looks poised to break its previous all-time high.
As stakeholders, players, and crypto wannabes ponder if increasing their stakes on Bitcoin, the world’s most popular crypto seems ideal now, despite the fact that it’s trading near a record high, Nairametrics decided to weigh in on some key fundamentals showing Bitcoin looks like a bargain.
With prices exceeding $18,000 for the first time since 2017, BTC looks poised to break its previous all-time high. More investors are holding bitcoin for wealth preservation.
A recent report from Glassnode, revealed plummeting Bitcoin exchange balances support the narrative that investors intend to hold their flagship crypto more than ever before, taking into consideration that with the prevailing demand in play, and limited supply of Bitcoin, the price would most definitely go north.
With prices exceeding $18,000 for the first time since 2017, $BTC looks poised to break its previous all-time high.
Meanwhile, plummeting #Bitcoin exchange balances support the narrative that investors intend to hodl.
— glassnode (@glassnode) November 23, 2020
Bitcoin liquidity continues its downward trajectory, buttressing that the macro bitcoin is becoming scarce for open sale.
It is also important to note that Bitcoin has a circulating supply of 19 million coins and a max supply of 21 million coins, meaning there are about 2million left to be mined.
Taking into account that about 4 million Bitcoins have been lost forever as a result of BTCs owners dying, and their next of kin not having access to such cryptos, it is fair to say there are only about 15million BTC presently in circulation to cater for over 7 billion people fighting to have a stake in Bitcoins, meaning that as BTC becomes scarce and more popular, it becomes a matter of time that the crypto asset valuation will hit the roof.
It’s vital to consider the bias saying that as global financial regulators begin to implement their regulatory framework on cryptos, it could become a matter of months for global banks and multinationals to increase their buying pressures on BTC. Thereby, pushing the price beyond the reach of an average investor.
Tesla up 500% in 2020, near $500 billion market value
The tech powerhouse is now less than $6 billion short of approaching the $500 billion market value.
Tesla, the electric car automaker, has gained 500% in 2020 and has become by far the world’s most valuable automaker in the world, despite it producing far less than Volkswagen, Toyota, or General Motors.
The tech powerhouse is now less than $6 billion short of approaching the $500 billion market value, and extending its surge since reports struck Wall Street on Tesla making its S&P 500 debut on December 21, forcing index funds to buy billions of dollars of its share.
Unsurprisingly, it became global investors’ choice amid its recent price action rising by 6% – showing a gain of over 6%. Tesla Inc. extended its rally at the most recent trading session ahead of its December debut in the S&P 500 (SPX), as it is now worth a market value of $494 billion.
Its market capitalization is higher than the Gross Domestic Product (GDP) of any African country, Nigeria – $448.1billion, South Africa – $351.4billion, Egypt – $303.2billion, Algeria – $169.98billion, Morocco – $118.7billion, Ethiopia – $96.12billion, Kenya – $95.5 billion, Angola – $94.6 billion, Ghana – $66.9 billion, Tanzania – $63.2 billion.
What you should know
Now worth $494 billion, Tesla will increase the concentration of heavyweight companies within the S&P 500. It will be the 7th most valuable company within the index, just behind Berkshire Hathaway and ahead of Visa Inc., according to Refinitiv data.
- About a fifth of the car company’s shares is owned by its Chief Executive, Elon Musk and other insiders.
- The S&P 500 is weighted by the number of companies’ stocks available on the stock market.
- The car company’s influence within the benchmark will be slightly reduced, putting it in 8 positions, just behind Johnson & Johnson, with an equivalent of about 1% of the S&P 500 index.
Bank stocks remain a buy amid uncertainty prevailing Nigeria’s economy
The All-Share Index and Market Capitalization depreciated by 2.57% to close the week at 34,136.82 and N17.838 trillion respectively.
Nigerian Stocks ended the previous week cumulatively on a bearish note.
What we know: The All-Share Index and Market Capitalization depreciated by 2.57% to close the week at 34,136.82 and N17.838 trillion respectively.
In the previous week, Nigerian Stocks had its bullish run halted arbitrarily on the bias that stock traders and investors intensified their profit, taking into account the significant amount of weak earnings recorded by Nigerian Banks.
It was unsurprising to see four Nigerian banks in the top 10 losers chart for the week, as investors fretted on such performance on the basis that Nigeria’s banking industry remains the most vibrant after Agriculture, Energy in Africa’s largest economy.
That said, In the coming week stock traders are expected to be very cautious amid recent macros showing Africa’s largest economy has dipped into a recession in Q3 as oil production dropped to a four-year low.
Abdul-Rasheed Oshoma Momoh, Head of Capital Market in TRW Stockbrokers Ltd, in a phone chat interview with Nairametrics, said Nigerian markets are presently playing out like a ping pong ball the momentum has slowed down for now.
More of consolidation now as investors buy into good stocks that have a light at the end of the tunnel. (Zenith Bank, UBA, GTBank, First Bank, Access Bank) taking into consideration he doesn’t see any new highs now till 2021.
Bottom- line: Profit taking is expected to remain at least in the near term, taking into consideration Nigeria is officially in a recession, meaning a lot needs to be done to get Africa’s biggest economy on its foot, as such development could trigger more profit-taking in spite of the positive trend playing relatively at Africa’s best-performing equity market.