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Market Views

U.S leading stocks suffer biggest daily plunge since October 28, 2020

The Dow Jones Industrial Average plunged by 1.3%, closing with 30,223.89 and dropping about 700 index points at one point.

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Stocks, U.S. approves New York Stock Exchange listing plan to cut off investment banks

U.S stocks ended the first trading session of 2021 on a bearish note amid concerns about global COVID-19 cases and the Georgia senate runoff elections in play at the world’s largest economy.

What you must know: It was the biggest one-day sell-off since October 28 for the Dow (which comprises the most capitalized stocks in U.S Stock Exchange) and S&P 500, while the Nasdaq had its worst daily performance since December. 9.

READ: Top U.S stocks making investors very rich

READ: Tesla up 500% in 2020, near $500 billion market value

  • The Dow Jones Industrial Average plunged by 1.3%, closing with 30,223.89. At one point, the Dow dropped about 700 index points. Monday marked the first negative start to a year for the Dow since 2016.
  • The S&P 500 lost about 1.5% to 3,700.65.
  • The Nasdaq Composite also dropped 1.5%, ending the day at 12,698.45. Both the Dow and S&P 500 hit record highs at the open before turning lower.

READ: Here’s how to invest in US stocks from Nigeria

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on macros weighing hard on investors minds:

“Despite investors galloping out of the gates to face a brave new year, it was the same old lockdown fear that saw investors recoil as buyer beware set in.

READ: Nigerian stocks ranked world’s best-performing stock market

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“While the big macro recovery and rotation view may be the “ultimate trade for 2021,” the “January trade” could be very different as the near-term landscape got a whole lot more dangerous looking very quickly.

“Markets have treated recent lockdowns more as speed bumps than hitting a brick wall at full speed.”

READ: U.S. approves New York Stock Exchange listing plan to cut off investment banks

What to expect: However, the Georgia Senate runoff complicates matters as the street does not know how to trade or invest it. While it seems reasonable to assume that the status quo will see most post-election trades pull through, the balance of uncertainty lies in a Democratic sweep, especially if bond yields go higher.

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Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Message Olumide on Twitter @tokunboadesina. He is a Member of the Chartered Financial Analyst Society.

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Market Views

Economic summary: Crypto, Inflation & SIM Card Policies for the past week

Getting up to an eventful week ahead, these are the things you should know.

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Foreign investors demand for Nigerian stocks increases to N38.98 billion, Nigerians reveal why they pick their favourite banking stocks

Last week was interesting and we tracked some notable events in the economy and markets that would likely have an impact on your money this week.

Economic Indicators

The National Bureau of Statistics released its monthly inflation figures and it is pretty clear that inflation in Nigeria is going only one way — up. Inflation rate stands at 18.17% for the month of March, rising from 17.33% in February. Food inflation currently stands at 22.95%. The macro environment looks particularly gloomy for the average man with rising inflation eroding purchasing power.

READ: Nigeria’s inflation rate rises to 17.33% in February 2021, highest in four years

What we find the most significant is how this will affect investors. With inflation heading towards 20%, it is going to be increasingly difficult for fund managers and investors to earn decent returns on their investments. A few weeks back,  it was stated that the CBN had no real concern with inflation because it was caused by other related factors. We believe it is the right time for the Central Bank to step in by raising interest rates and mopping the excess liquidity in the economy.

The Central Bank last week announced that it was including wheat and sugar on the foreign exchange restriction list. Recall that the CBN had listed 41 items placed on the FX restriction list in 2015, then added maize to the list in 2020.

With existing players like Dangote Sugar, the CBN believes that Nigeria has enough or should have enough capacity to meet local demand.

READ: Biden tax opportunity for Nigeria

Fixed Income

Last week, The Debt Management Office (DMO) announced the offer of N150 billion bonds for subscription by auction in the month of April on behalf of the Federal Government. We reported two weeks ago that bond prices were falling as the yield was rising. As at April, 15th, the S&P FMDQ Nigerian Sovereign Bond Index was -22.07% YTD.

Nigerian investors can still capitalize on decent yields in the bond market. The total subscription received from investors for the bonds was N333.48bn comprising N65.25bn for 16.2884% FGN March 2027 bonds; N110.19bn for 12.5% FGN March 2035 bonds; and N158.04bn for 9.8% FGN July 2045 bonds.

Cryptocurrency and volatility

The cryptocurrency market had a bullish week till yesterday when sell-offs in the market ensured that coins like Ethereum dropped by about 21.46%. Olumide Adesina, a market analyst and cryptocurrency expert, called it a “bloody Sunday.” In a Twitter Spaces conversation with Ugodre Obi-Chukwu on Saturday, he discussed how the market was overheating and the bullish run was unsustainable. Despite the losses yesterday, there is still a lot of upside on cryptocurrencies and many experts remain bullish long-term.

For whoever is willing to invest in this asset class, the rule of thumb is to only invest money you can part with and do your research.

READ: Cryptocurrency: FG should set up presidential commission on cryptocurrency – ACCI

Other related news:

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FG lifts suspension of issuance of new sim cards

The FG lifted its ban on new sim cards for telco players last week. This had previously been halted by the Federal Ministry of Communications and Digital Economy last December. Without a doubt, this is good news for stakeholders in the industry as analysts had predicted that the ban would affect the growth of the sector.

From the government’s perspective, it begs the question,  what was the need to issue a ban on new sim cards in the first place?

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Market Views

SEC ban on foreign stocks denies Nigerian investors of generational wealth

Amid the booming interest in America, the SEC has reminded participants and investors that only authorized securities can be sold to the Nigerian public.

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NYSE, Jumia public listing, MTN IPO, Jumia shares, ADSs

As Americans turn their attention to stock and cryptocurrency markets, trading platforms Robinhood and Coinbase took the top two slots in Apple’s App Store last week.

According to Sensor Tower, Robinhood took the top spot on Friday, followed by crypto trading platform, Coinbase. TikTok came in third place. The surge in popularity coincides with Coinbase’s Nasdaq debut on Wednesday when bitcoin surpassed $64,000 for the first time.

The rise in popularity reflects an increase in retail trading during the pandemic, as well as a “meme stock” community centred on companies like GameStop. After a group of traders on Reddit deployed a short squeeze in January, the video game store became a household name.

READ: Nigerian fintech startup, Blueloop joins Y Combinator’s winter 2021 batch

This isn’t the first time Robinhood has topped the charts. The brokerage firm was the most successful app in the Apple and Google app stores in January, at the height of the GameStop controversy. Another trading app, Webull, came in second. The top ten also included Coinbase, Square’s Cash App, and Fidelity. During the height of the GameStop frenzy, Robinhood, which shut down the buy-side of those stocks, received backlash on social media, and its CEO was later called to testify in front of Congress.

Amid the booming interest in America, the Securities and Exchange Commission of Nigeria (SEC Nigeria) has exercised its legal authority and reminded participants and investors that only authorized securities can be sold to the Nigerian public. To put it another way, international stocks such as Tesla Inc., Apple, Amazon, Google, GameStop and others that are not currently listed in Nigerian jurisdiction should not be sold to Nigerian residents or businesses.

READ: Ripple scores early legal victory, XRP breaks above $1 for first time in 3 years

As a result of the new SEC directive, young Nigerians who have been using the new invest tech service providers to help diversify their portfolios face new challenges especially with the CBN ban on crypto transactions.

This creates a sizable problem particularly for traders that would at least want to earn above the 18% inflation rate.

What this means:

  • Retail investors are paying more attention to financial applications as they have witnessed massive gain in assets like crypto and meme stock.
  • Nigerians may find it difficult to benefit from international retail platforms with the SEC announcement.
  • SEC regulation may hamper the fundamental ideology for globalization especially from a finance perspective.

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