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Stock Market Plummets as Optimism Wanes

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After rallying for five day the previous week following investors drive to build position ahead of probable positive earnings release by listed companies, the Nigerian equities market closed in the red last week as optimism waned, forcing anxious investors to book profit.

The equities market had closed positive the previous week with a 5.05 per cent gain after a five-day rally which strengthened benchmark indicator by 1,187.92 points. Both the NSE-ASI and market capitalisation closed higher ending the week at 24,689.69pt and N8.491trillion respectively. Market sentiment was positive with renewed active bargain tendency displayed toward large and medium cap stock in anticipation of positive earnings release and likelihood of dividend announcement.

However, the  market was volatile in most of the trading days last week  as supply  outstripped demand while most investors maintained cautious approach.

At the close of trades,   the Nigerian Stock Exchange  All-Share Index (ASI)  and market capitalisation depreciated by 1.04 per cent to close the week at 24,432.51 and N8.403 trillion respectively.

Similarly, all other Indices finished lower during the week, with the exception of the NSE Main Board Index, NSE Banking Index, NSE Consumer Goods Index and NSE Oil and Gas and  that appreciated by 0.95 per cent, 0.04 per cent, 0.21 per cent and 3.30 per cent respectively, while the NSE ASeM index closed flat.

Meanwhile, analysts at InvestmentOne Limited have said  that the market will remain volatile and enjoined investors to tread cautiously and take position in quality name ahead of earning season.

“With the market breadth index closing negative, we expect market to be volatile in the coming session. Hence, we reiterate our earlier stance for position-building in quality name for a medium to long term horizon,” they stated.

Daily Performance Analysis

Trading on the Exchange had commenced on a positive note last Monday gaining 0.56 per cent corresponding to a N47 billion increase in market capitalisation to N8.54 trillion. The session looked likely to close in the red but a late rally saw the index rise from 24,381.47, during intraday, to close at 24,827.50.

There were 13 stocks that appreciated on the day against 25 losers. The session was driven by a late rally in Dangote Cement Plc  (3.75 per cent) in addition to Seplat Plc (3.65 per cent) and Guaranty Trust Bank Plc (0.73 per cent). These performances offset the declines in Nestle Nigeria Plc (3.60 per cent), Zenith Bank Plc (4.92 per cent) and FBN Holdings Plc (4.07 per cent). Consequently, the Industrial and Oil and Gas sectors rose by 2.00 per cent and 0.62 per cent respectively, while the Consumer Goods and the Banking sectors shed 1.37 per cent and 0.97 per cent respectively.

The market depreciated Tuesday after trending upwards for six days. The NSE ASI decreased by 1.26 per cent to close at 24,514.91. The depreciation recorded in the share prices of Dangote Cement Plc, Nigerian Breweries Plc, Nestle Nigeria Plc, Zenith Bank Plc and Guaranty Trust Bank Plc, were mainly responsible for the loss recorded in the index. Similarly, the market capitalisation depreciated by 1.26 per cent to close at N8.43 trillion, compared with the appreciation of 0.56 per cent recorded the prior day to close at N8.54 trillion.

The  market declined  further on Wednesday  with the NSE ASI  decreasing  by 1.87 per cent to close at 24,056.12. Similarly, the market capitalisation depreciated by 1.87 per cent to close at N8.27 trillion. The depreciation recorded in the share prices of Dangote Cement Plc, Guinness Nigeria Plc, Nestle Nigeria Plc, Unilever Nigeria Plc and Guaranty Trust Bank Plc caused  the loss recorded in the index.
However, despite  the low market activity witnessed on Thursday, the NSE ASI rebounded  appreciating  by 0.85 per cent to close at 24,261.69.

The appreciation resulted from rise recorded in the share prices of Nigerian Breweries Plc, Guinness Nigeria Plc, Guaranty Trust Bank Plc, FBN Holdings Plc and Seplat Plc. Similarly, the market capitalisation appreciated by 0.85 per cent to close at N8.34 trillion, compared with the depreciation of 1.87 per cent recorded the previous day to close at N8.27 trillion. The total value of stocks traded on the floors of the NSE on the day was N959.77 million, down by 50.84 per cent from N1.95 billion traded the previous day.

The market closed positive for the second consecutive day last Friday. It rose 0.70 per cent or 170.82 points to 24,432.51 points. This represented a N58 billion increase in market capitalization to N8.40 trillion. The  positive outcome was driven by gains in Nestle Nigeria Plc (7.69 per cent), Nigerian Breweries Plc (0.69 per cent), Seplat Plc (5.00 per cent) and  some banking stocks: Guaranty Trust Bank Plc, (1.02 per cent) and Zenith Bank Plc (0.97 per cent) offsetting the loss in FBN Holdings Plc (3.56 per cent), ETI Plc (0.95 per cent) and Diamond Bank Plc (6.63 per cent).

In addition, there were improvements in investor sentiment as Nestle Nigeria Plc led the 22 stocks that gained compared to Portland Paints Plc (9.43 per cent), which was the biggest loser of the 16 stocks that declined. Industrial was the only sector to end the day in the red, shedding 0.02 per cent while Consumer Goods climbed 2.36 per cent. The Oil and Gas and Banking sectors finished the session up 1.09 per cent and 0.32 per cent respectively. Market activity was mixed last Friday with total volume increasing by 45 per cent while total value dropped 4 per cent as 172 million units of shares worth N925 million were exchanged.

Market Turnover

Meanwhile,  investors traded  1.202 billion shares worth N9.641 billion in 13,712 deals were traded last week in contrast to a total of 1.407 billion shares valued at N17.277 billion that exchanged hands the previous week in 14,914 deals.

The Financial Services Industry led the activity chart with 1.005 billion shares valued at N6.471 billion traded in 8,313 deals; thus contributing 83.66 per cent and 67.12 per cent to the total equity turnover volume and value respectively.

The Consumer Goods Industry followed with 54.333 million shares worth N2.114 billion in 2,365 deals. The third place was occupied by the Conglomerates Industry with a turnover of 45.977 million shares worth N184.205 million in 518 deals.

Trading in the top three equities namely – Zenith International Bank Plc, Guaranty Trust Bank Plc and United Bank for Africa Plc, accounted for 500.360 million shares worth N5.449 billion in 4,011 deals, contributing 41.63 per cent and 56.52 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 93,518 units of Exchange Traded Products (ETPs) valued at N1.158 million executed in 48 deals, compared with a total of 115,641 units valued at N1.285 million transacted the previous week in 28 deals.

A total of 150,000 units of Federal Government Bonds valued at N169.326 million were traded in 2 deals compared to a total of 39,340 units of both State (1) and Federal Government Bonds (2) valued at N44.246 million transacted the previous week in 3 deals.

Gainers and Losers

In terms of   price movement, a total of 22 equities appreciated in price during the week, lower than 26 equities of the previous week. Thirty-seven equities depreciated in price, higher than 30 equities of the previous week, while 131 equities remained unchanged, lower than 134 equities recorded in the previous week.

The top 10 gainers were: Seplat Plc (N50.37), Glaxo Smithkline Plc (N3.28), Ecobank Transnational Plc (85 kobo),  NAHCO Plc (49 kobo), May & Baker Plc (14  kobo), NPF Micro Finance Bank Plc ( nine kobo) Tiger Branded Consumer Plc (six kobo), UAC Nigeria (97 kobo), Airline Services and Logistics (10 kobo) and  Cutix (seven kobo).

On the other hand, the top 10 losers included: NNFM Plc (70 kobo),  Portland Paint Plc (38 kobo), Oando Plc (30 kobo), Caverton Plc (17 kobo), Diamond Bank (13 kobo) Honeywell Flour Plc (12 kobo), Learn Africa Plc ( nine  kobo), Unity Bank Plc, Continental Reinsurance Plc (eight kobo apiece ), and Neimeth Plc (six kobo).

ThisDay

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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New COVID Variant: Brent Crude Sheds Over $10 to $72 Per Barrel

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Crude oil - Investors King

Brent crude oil extended decline by over $10 on Friday on concerns that a new COVID variant called B.1.1.529 could force economies to impose restrictions and slow down global demand.

Brent crude, against which Nigerian crude oil is measured, dropped from $82.55 per barrel it attained on Thursday to as low as $72.09 on Friday at 7:20 pm Nigerian time before it rebounded slightly to $72.98 per barrel as shown below.

Global financial markets plunged across the board following reports that two cases of the new heavily mutated COVID variant from South Africa have been reported in Hong Kong and that the United Kingdom, one of the most affected nations during COVID-19 with over 140,000 deaths has halted flights from six South African nations to prevent a potential breakout of the new COVID variant.

Experts are concerned that the new variant outbreak would slow down global growth and increase global risks going into the new year.

According to Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA, “Even without severe restrictions, people will adopt more caution which will weigh on demand, as OPEC+ has repeatedly stated and factored into their models.”

However, heavy crude oil-consuming nations like the United States, China and others that have been calling for more supply will now enjoy substantial price reduction if this continues, therefore, Joe Biden may not need to release millions of barrels into the global market.

“Crude is back at levels last seen at the start of October and if this risk aversion continues in the weeks ahead, there’s plenty of room to fall. While OPEC+ would likely have avoided altering production plans next week or in the months following in response to the SPR releases, it may soon feel its hand is being forced. Next week may come too soon but another major outbreak could see them slam on the brakes,” Craig Erlam added.

 

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Flight to Safety as Variant Fears Soar

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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

Risk assets are getting pummelled at the end of the week as a new Covid variant sparks fears of new restrictions and lockdowns.

The most worrying thing about the new strain at the moment is how little we know about it, with early indications being that it could be more problematic than delta. The biggest fear is that it will be resistant to vaccines and be a massive setback for countries that have reaped the benefits from their rollouts.

We’ll no doubt learn more in the days and weeks ahead but for now, fear of the unknown will weigh heavily going into the weekend and could carry over into next week. We’re seeing a typical flight to safety in the markets with equities, commodity currencies and oil getting whacked and traditional safe havens like bonds, gold, the yen and swissy getting plenty of love.

In times like this, we get a true sense of what investors consider to be real, reliable safe-havens. And bitcoin is off 8% today which has delivered a fatal blow to its safe-haven credentials, putting an end to another crypto myth that has surfaced over the years despite there being zero evidence to back it up. Maybe one day investors will have a different opinion but right now, when their cash is at stake, they’re sticking with safe-haven assets with a track record, as they should.

Pfizer has sought to calm nerves, stating that should a vaccine-escape variant emerge, it could produce a tailor-made vaccine in about 100 days. Three months can feel like a long time but when compared to where we were 18 months ago, that is very reassuring as a worst-case. It may not be quick enough to prevent more restrictions this winter though.

Erdogan standing firm on interest rates

Turkish President Erdogan is successfully talking down the lira once again, claiming there’s no turning back from the new economy program and that interest rates will decline. It’s incredible to see a President have such disregard for something that will have such a huge impact on so many people. It’s like he’s playing with the markets to see what he can get away with. In a sign of Erdoganomics fatigue, the currency has quickly recouped the more than 2% losses it incurred immediately following the comments. A sign that these antics are now expected and priced in, it seems.

Oil slides on variant concerns

Oil is among the assets taking a heavy beating on the variant news today, falling more than 5% as traders fret about the impact on restrictions and behaviour this winter. Even without severe restrictions, people will adopt more caution which will weigh on demand, as OPEC+ has repeatedly stated and factored into their models.

It seems the US and other consuming countries have played their hand too soon. Sure, Biden will score some political points ahead of the midterms as voters see prices at the pump fall, which was ultimately the goal. But should prices spike again early next year, what then?

Crude is back at levels last seen at the start of October and if this risk aversion continues in the weeks ahead, there’s plenty of room to fall. While OPEC+ would likely have avoided altering production plans next week or in the months following in response to the SPR releases, it may soon feel its hand is being forced. Next week may come too soon but another major outbreak could see them slam on the brakes.

Gold jumps on safe-haven appeal

Times like this are when gold shines and we’re seeing investors flock back to an old reliable friend today. It has pulled a little off its highs after hitting $1,815 earlier in the session but it remains above $1,800 at the time of writing. It’s an interesting one for gold and bonds, as the situation now is very different from last year.

Central banks can’t just turn on the taps again with a “whatever it takes” avalanche of cheap cash as they have before. Inflation is a real problem and lockdowns will exacerbate the problem. Sure, they may be a little more patient and hold off on raising rates next month in the case of some or accelerating tapering in the case of the Fed, but they can hardly ramp up their stimulus measures in any considerable way. Their hands are tied.

This should still be bullish for gold as, at the very least, central banks will delay tightening until they have a better idea of the risks to the economy. Allowing inflation to run hot unaddressed could increase the hedge appeal of gold again, particularly in these uncertain times.

Bitcoin remains a speculative risk asset, for now

In recent weeks we’ve seen that, in times of real uncertainty, bitcoin has not done well as an inflation hedge or a safe haven asset. There’s no doubt it’s a fascinating tradable instrument and a highly speculative one, but it’s quite clear now that it’s a risk asset and nothing more. Not at the moment anyway. Who knows what the future holds.

It’s taking a real beating today, off around 8% and looking vulnerable. Key support around $55,500 has fallen which will now draw attention back to $50,000. I’m sure soon enough the eternal crypto bulls will pile back in and smell a bargain but as we’ve seen so often in the past, bitcoin is capable of enormous gains and eye-watering corrections.

If this new variant triggers major risk aversion in the markets, it could come under serious pressure. Unless of course, the inflation narrative catches again. No sign of it yet but, as ever with crypto, it has an incredible ability to find the bullish case in anything. Maybe this will be next.

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Markets to Wobble Then Shrug-off New Covid Variant

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The new Covid-19 variant will temporarily wobble financial markets, but concerns will be quickly shrugged off by them, predicts the CEO of one of the world’s largest independent financial advisory, asset management and fintech organisations.

The prediction from deVere Group’s Nigel Green comes as a new Covid-19 strain discovered in southern Africa weighed on global markets on Thursday.  Travel stocks, hospitality firms, and bank stocks were amongst the hardest hit.

The World Health Organization will meet on Friday to analyse the new variant. The meeting will determine if the B.1.1.529 strain should be designated a variant of “interest” or of “concern.” The variant, which was identified on Tuesday, is said to carry an “extremely high number” of mutations.

On Friday, Asia Pacific markets were down around 2%, European stock futures predict a more than 2% drop at opening trades. Meanwhile, U.S. stock futures are also set to open lower, trading only until 1p.m. after Thursday’s Thanksgiving holiday.

Mr Green says: “Experts are determining whether the new variant is more transmissible or more deadly than previous ones.

“The fact that a new strain has been discovered and, critically, that at this stage we know little about it has caused jitters in the financial markets, which loathe uncertainty. The headlines have caused a knee-jerk reaction.

“In addition, Wall Street was closed yesterday meaning that a large bulk of global trades were missing, making other moves more pronounced.”

He continues: “This wobble is likely to be temporary with markets remaining bullish for the time being.

“Global shares have jumped 16% this year with investors focusing on the post-pandemic economic rebound. They largely shrugged off the Delta variant that caused a mini wave of market nerves in the summer.”

He goes on to add: “It’s likely that markets will do the same with this new variant.

“This is because, as Delta showed, mutations are now expected and we have more of a blueprint about how to deal with them.

“Instead, global financial markets will be focusing on other pressing issues including high inflation caused by supply side bottle necks and the likelihood of a quicker pull away from ultra-loose monetary environment.”

The deVere CEO concludes: “Markets will temporarily wobble on the uncertainty of this new Covid variant, but will remain bullish and largely focused on other issues.”

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