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Stocks Rebound on Renewed Demand, Bargain Hunting

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Stock Investors

The Nigerian stocks equities rebounded last week after two weeks of bear run, appreciating by 1.48 per cent following renewed demand on the back of bargain hunting and positive reactions to the results impressive results of Access Bank Plc and Guaranty Trust Bank Plc(GTBank).

Investors’ sentiments had remained negative in the past weeks due to weak half year (H1) corporate results of most companies. Also, many investors saw the fixed income market as a safer investment destination following the recent hike in Monetary Policy Rate (MPR), leading to a significant flow of investments into the fixed income market. This development priced down most equities, thereby creating an entry opportunity for discerning investors.

The renewed demand for equities by such discerning investors led the market to close on a bullish note last week with the Nigerian Stock Exchange (NSE) All-Share Index, rising by 1.48 per cent to close at 28,642.25. Similarly, market capitalisation added N117.4 billion to be at N9. 5 trillion. Trading volume also improved by 20 per cent to N12.940 billion staked on 1.375 billion, up from N10.711 billion invested in 1.361 billion shares.

With the exception of the NSE Insurance Plc and NSE Oil and Gas Indices that depreciated, other sectoral indicators appreciated while NSE ASeM Index closed flat. The NSE Consumer and Industrial Goods indices advanced the most, up 2.6 per cent apiece on the account of rally in Nigerian Breweries Plc ( 5.8 per cent) Unilever Nigeria(10.2 per cent), Lafarge Africa Plc (+5.1 per cent) and Dangote Cement (+1.7 per cent). The Banking Sector Index rose 2.1 per cent on gains in GTBank (+4.1 per cent), which reported a six month gross earnings and profit after tax (PAT) of N209.9 billion and N77.5 billion respectively. Similarly, Access Bank gained 1.6 per cent after reporting gross earnings and PAT of N185.2 billion and N39.5 billion in that order. Conversely, the NSE Insurance Index declined 1.2 per cent as a result of losses in Continental Reinsurance Plc (-3.0 per cent) and Custodian (-2.3 per cent).

Daily Performance Summary

The bulls dominated the market , being in control for four days. The NSE ASI trended northwards from Monday to Wednesday, appreciating 0.26 per cent, 0.27 per cent and 0.18 per cent in the first three trading sessions before easing on Thursday due to profit taking. However, the bulls resurged on Friday, up 0.6 per cent. Trading had opened for the week on Monday on a bullish note, with the NSE appreciating by 0.26 per cent to close at 27,316.52. Similarly, the NSE Industrial Goods Index rose 1.98 per cent and Consumer Goods (+0.86 per cent).On the other hand, the NSE Oil and Gas (-2.23 per cent) and NSE Banking indices suffered losses of 2.23 per cent and 1.66 per cent respectively. Market breadth was negative with 11 gainers versus 37 losers. Total volume traded decreased by 45.41 per cent to 213.64 million shares, valued at N2.05 billion, and traded in 3,742 deals.

The bullish sentiments persisted on Tuesday following sustained interest in large cap stocks such as Zenith Bank, GTBank and Nigerian Breweries as the NSE ASI rose by 0.27 per cent. On Wednesday, the positive momentum in the equities market continued with the NSE ASI gaining 0.2 per cent to close at 27,437.25. Market capitalisation added N16.6 billion to close at N9.4trillion.

However, the market could not sustain the bullish run on Thursday as the NSE ASI decline by 0.1 per cent to close at 27,420.99, while market capitalisation N5.6 billion to be N9.4 trillion. The market was dragged by sell-offs in GTBank (-1.2 per cent), Guinness (-3.8 per cent), Union Bank (-4.8 per cent) and Transcorp (-4.6 per cent).

Market Turnover

Meanwhile, market turnover stood at 1.375 billion shares worth N12.940 billion in 16,915 deals were traded by investors on the floor of the exchange in contrast to a total of 1.361 billion shares valued at N10.711 billion that exchanged hands the previous week in 16,070 deals.

The Financial Services Industry led the activity chart with 1.195 billion shares valued at N8.631 billion traded in 10,365 deals, thus contributing 86.90 per cent and 66.70 per cent to the total equity turnover volume and value respectively. The Conglomerates Industry followed with 76.489 million shares worth N154.736 million in 964 deals. The third place was occupied by the Consumer Goods Industry with a turnover of 38.048 million shares worth N1.768 billion in 2,676 deals.

Trading in the top three equities namely, United Bank for Africa Plc, Access Bank Plc and FBN Holdings Plc accounted for 559.065 million shares worth N2.452 billion in 3,690 deals, contributing 40.66 per cent and 18.95 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 57,828 units of Exchange Traded Products (ETPs) valued at N766,162.96 executed in 37 deals, compared with a total of 1,003 million units valued at N12.116 million transacted last week in 43 deals.

A total of 3,127 units of Federal Government Bonds valued at N3.057 million were traded in six deals compared to a total of 4,044 units of Federal Government Bonds valued at N4.062 million transacted last week in six deals.

Gainers and Losers

The price movement chat showed that 25 equities appreciated in price during the week, higher than 18 equities of the previous week. Conversely, 39 equities depreciated in price, higher than the 38 equities of the previous week, while 116 equities remained unchanged lower than one hundred and 124 equities recorded in the preceding week. Unilever Nigeria Plc led the price gainers with 10.2 per cent, followed by N.E.M Insurance Plc with 10 per cent. Nigerian Breweries Plc gained 5.7 per cent, while Lafarge Africa Plc 5.1 per cent. Other top gainers include: Eterna Plc (5.1 per cent); Seven-Up Bottling Company Plc (4.9 per cent); Stanbic IBTC Holdings Plc (4.3 per cent); GTBank Plc (4.1 per cent); Fidelity Bank Plc (4.0 per cent); Livestock Feeds Plc (3.3 per cent).

On the contrary, Champion Breweries Plc led the price losers with 19.5 per cent, trailed by Wema Bank Plc with 15.1 per cent, while National Aviation Handling Company Plc appreciated by 14.0 per cent. Cement Company of Northern Nigeria Plc appreciated by 11.9 per cent.

Other losers are: Fidson Healthcare Plc (11.6 per cent); AIICO Insurance Plc (10 per cent); Conoil Plc (9.6 per cent), UACN Property Development Company Plc (9.4 per cent); Unity Bank Plc (8.1 per cent) and International Breweries Plc (8.0 per cent.

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.

Crude Oil

Brent Crude Rises to $69 on IEA Report

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Oil prices rose after the release of the International Energy Agency’s (IEA)  closely-watched Oil Market Report, with WTI Crude trading at above $66 a barrel and Brent Crude surpassing the $69 per barrel mark.

Prices jumped even though the agency revised down its full-year 2021 oil demand growth forecast by 270,000 barrels per day (bpd) from last month’s assessment, expecting now demand to rise by 5.4 million bpd. The downward revision was due to weaker consumption in Europe and North America in the first quarter and expectations of 630,000 bpd lower demand in the second quarter due to India’s COVID crisis.

The excess oil inventories of the past year have been all but depleted, and a strong demand rebound in the second half this year could lead to even steeper stock draws, the IEA said yesterday, keeping an upbeat forecast of global oil demand despite the weaker-than-expected first half of 2021.

However, the upbeat outlook for the second half of the year remains unchanged, as vaccination campaigns expand and the pandemic largely comes under control, the IEA said.

Moreover, the global oil glut that was hanging over the market for more than a year is now gone, the agency said.

“After nearly a year of robust supply restraint from OPEC+, bloated world oil inventories that built up during last year’s COVID-19 demand shock have returned to more normal levels,” the IEA said in its report.

In March, industry stocks in the developed economies fell by 25 million barrels to 2.951 billion barrels, reducing the overhang versus the five-year average to only 1.7 million barrels, and stocks continued to fall in April.

“Draws had been almost inevitable as easing mobility restrictions in the United States and Europe, robust industrial activity and coronavirus vaccinations set the stage for a steady rebound in fuel demand while OPEC+ pumped far below the call on its crude,” the IEA said.

The market looks oversupplied in May, but stock draws are set to resume as early as June and accelerate later this year. Under the current OPEC+ policy, oil supply will not catch up fast enough, with a jump in demand expected in the second half, according to the IEA. As vaccination rates rise and mobility restrictions ease, global oil demand is set to soar from 93.1 million bpd in the first quarter of 2021 to 99.6 million bpd by the end of the year.

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Crude Oil

OPEC Expects Increase In Global Oil Demand Raises Members’ Forecast on Crude Supply

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The Organisation of Petroleum Exporting Countries (OPEC) yesterday lifted its forecast on its members’ crude this year by over 200,000 bpd and now expects demand for its own crude to average 27.65mn bpd in 2021.

This is almost 5.2mn bpd higher than last year and around 2.7mn b/d higher than an earlier estimate of the group’s April production.

According to the highlights of the organisation’s latest Monthly Oil Market Report (MOMR), OPEC crude is projected to rise from 26.48 million bpd in the second quarter to 28.7 million bpd in the third and 29.54 million bpd in the fourth quarter of the year.

The report also indicated a fall in Nigeria’s crude production from 1.477 bpd in February to 1.473, a difference of just about 4,000 bpd before rising again in April to 1.548 million bpd, to add 75,000 bpd last month.

OPEC stated that its upward revision of members’ crude was underpinned by a downgrade in the group’s forecast for non-OPEC supply, which it now expects to grow by 700,000 bpd to 63.6mn b/d against last month’s report’s projection of a 930,000 bpd rise to 63.83mn bpd.

The oil cartel projected that US crude output would drop by 280,000 bpd this year, compared with its previous forecast for a 70,000 bpd decline.

On the demand side, OPEC kept its overall forecast unchanged from last month’s MOMR, stressing that it expects global oil demand to grow by 5.95 million bpd to 96.46 million bpd this year, partly reversing last year’s 9.48mn bpd drop.

Spot crude prices fell in April for the first time in six months, with North Sea Dated and WTI easing month-on-month by 1.7 percent and 1 percent, respectively.

On the global economic projections, the cartel said stimulus measures in the US and accelerating recovery in Asian economies might continue supporting the global economic growth forecast for 2021, now revised up by 0.1 percent to reach 5.5 percent year-on-year.

This comes after a 3.5 percent year-on-year contraction estimated for the global economy in 2020.

However, global economic growth for 2021 remains clouded by uncertainties including, but not limited to the spread of COVID-19 variants and the speed of the global vaccine rollout, OPEC stated.

“World oil demand is assumed to have dropped by 9.5 mb/d in 2020, unchanged from last month’s assessment, now estimated to have reached 90.5 mb/d for the year. For 2021, world oil demand is expected to increase by 6.0 mb/d, unchanged from last month’s estimate, to average 96.5 mb/d,” it said.

The report listed the main drivers for supply growth in 2021 to be Canada, Brazil, China, and Norway, while US liquid supply is expected to decline by 0.1 mb/d year-on-year.

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Crude Oil

Oil Rises Over Concerns of Fuel Shortages

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oil - Investors King

Oil prices rose on Tuesday, as lingering fears of gasoline shortages due to the outage at the largest U.S. fuel pipeline system after a cyber attack brought futures back from an early drop of more than 1%.

Brent crude futures rose 35 cents, or 0.5%, to $68.67 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 49 cents, or 0.8%, to $65.41.

Benchmark gasoline futures prices rose 1 cent to $2.14 a gallon.

On Monday, Colonial Pipeline, which transports more than 2.5 million barrels per day (bpd) of gasoline, diesel and jet fuel, said it was working to restore much of its operations by the end of the week.

Right now there’s a generalized anxiety premium being built into prices because of Colonial and it’s keeping a floor under the market,” said John Kilduff, partner at Again Capital LLC in New York.

Fuel supply disruption has driven gasoline prices at the pump to multi-year highs and demand has spiked in some areas served by the pipeline as motorists fill their tanks.

Traders booked at least four tankers to store refined oil products off the U.S. Gulf Coast refining hub after a cyber attack that knocked out the pipeline, shipping data showed on Tuesday.

North Carolina, the U.S. Environmental Protection Agency and Department of Transportation issued waivers allowing fuel distributors and truck drivers to take steps to try to prevent gasoline shortages.

OPEC on Tuesday raised its forecast for demand for its crude by 200,000 bpd and stuck to its prediction of a strong recovery in global oil demand this year as growth in China and the United States counters the coronavirus crisis in India.

Meanwhile, the rapid spread of infections in India has increased calls to lock down the world’s second-most populous country and the third-largest oil importer and consumer.

India’s top state oil refiners have already started reducing runs and crude imports as the new coronavirus cuts fuel consumption, company officials told Reuters on Tuesday.

On the bullish side for crude, analysts are expecting data to show U.S. inventories fell by about 2.3 million barrels in the week to May 7 after a drop of 8 million barrels the previous week, a Reuters poll showed.

Gasoline stocks are expected to have fallen by about 400,000 barrels, analysts estimated ahead of reports from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday.

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