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Analysts Predict Weak Start for Capital Market

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  • Analysts Predict Weak Start for Capital Market

Financial analysts say the capital market is likely to start the week on negative note following the bearish trend that trailed the market last week.

Bearish sentiments pervaded the equities market last week, as the Nigerian Stock Exchange All-Share Index declined by 1.15 per cent week-on-week to peg the year-to-date return at -5.80 per cent.

The market closed negative on four out of the five trading days of the week.

“This week, we expect the current market mood to persist in the absence of positive news flow to sway investors’ sentiments. Therefore, we advise value-seeking investors to trade with caution,” analysts at Meristem Securities Limited said in the firm’s weekly report.

Third quarter 2016 earnings, releases flooded the market on Monday last week, being the deadline for result submission by listed companies. The results were mixed across board, thus generating varied reactions from investors.

However, the volume traded and value of transactions advanced by 2.29 per cent and 12.45 per cent week-on-week, respectively.

The naira depreciated against the United States dollar by 7.42 per cent week-on-week at the inter-bank segment of the market, as the spot rate settled at N328.90/dollar. However, at the parallel market, the currency traded flat week-on-week to close at N470/dollar at the end of the week.

There was net Open Market Operation sales of N31bn, arising from repayment and auction of N138bn and N169bn, respectively. Consequently, system liquidity declined, resulting to an increase in the Open-by-Back and Overnight rates by 3.83 per cent and 2.75 per cent week-on-week accordingly, to settle the average money market rate at 13.25 per cent at the end of last week.

On what will shape the markets this week, analysts at Vetiva Capital Management Limited said, “On the equity market, save for some late session spikes during Friday’s session, we note that the NSE ASI was on a downward trend over the final hour of trade amid sell pressure across board. This points to a weak open this week.

“Although the demand for Treasury bills remained resilient at the week’s close despite consistent Central Bank of Nigeria’s mop up, we anticipate a relatively tepid trading session at the week open across the fixed income space.

“Given the significant weakness recorded at the week close, we expect the CBN intervention at the week open.”

Investors’ demand for Treasury bond instruments was quite strong last week, with a noticeable bias for shorter-termed instruments. Consequently, the average bond yield trended southward to settle at 19.58 per cent as of November 3, 2016, reflecting a 0.14 per cent week-to-date decline.

Also, the result of T-bills auction held last week showed that rates were slightly higher than at the previous action. The stop rates for the 91-day, 182-day and 364-day instruments were 14 per cent, 17.50 per cent and 18.50 per cent, respectively.

In the Treasury bond space, there were mixed reactions, as the average yield remained flat at 16.16 per cent with investors’ sentiments tilting towards the shorter end of the curve.

“We expect this trend to continue in the short term,” the Meristem analysts said.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Crude Oil Dips Slightly on Friday Amid Demand Concerns

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On Friday, global crude oil prices experienced a slight dip, primarily attributed to mounting concerns surrounding demand despite signs of a tightening market.

Brent crude prices edged lower, nearing $83 per barrel, following a recent uptick of 1.6% over two consecutive sessions.

Similarly, West Texas Intermediate (WTI) crude hovered around $78 per barrel. Despite the dip, market indicators suggest a relatively robust market, with US crude inventories expanding less than anticipated in the previous week.

The oil market finds itself amidst a complex dynamic, balancing optimistic signals such as reduced OPEC+ output and heightened tensions in the Middle East against persistent worries about Chinese demand, particularly as the nation grapples with economic challenges.

This delicate equilibrium has led oil futures to mirror the oscillations of broader stock markets, underscoring the interconnectedness of global economic factors.

Analysts, including Michael Tran from RBC Capital Markets LLC, highlight the recurring theme of robust oil demand juxtaposed with concerning Chinese macroeconomic data, contributing to market volatility.

Also, recent attacks on commercial shipping in the Red Sea by Houthi militants have added a risk premium to oil futures, reflecting geopolitical uncertainties beyond immediate demand-supply dynamics.

While US crude inventories saw a slight rise, they remain below seasonal averages, indicating some resilience in the market despite prevailing uncertainties.

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Commodities

Nigeria’s Petrol Imports Decrease by 1 Billion Litres Following Subsidy Removal

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Nigeria’s monthly petrol imports declined by approximately 1 billion litres following the fuel subsidy removal by President Bola Ahmed Tinubu, the National Bureau of Statistics (NBS) reported.

The NBS findings illuminate the tangible effects of this policy shift on the country’s petroleum importation dynamics.

Prior to the subsidy removal, the NBS report delineated a consistent pattern of petrol imports with quantities ranging between 1.91 billion and 2.29 billion litres from March to May 2023.

However, in the aftermath of Tinubu’s decision, the nation witnessed a notable downturn in petrol imports, with figures plummeting to 1.64 billion litres in June, the first post-subsidy month.

This downward trend persisted in subsequent months, with July recording a further reduction to 1.45 billion litres and August witnessing a significant decline to 1.09 billion litres.

August’s import figures represented a decrease of over 1 billion litres compared to the corresponding period in 2022.

The NBS report underscores the pivotal role of the subsidy removal in reshaping Nigeria’s petrol import landscape with the Nigerian National Petroleum Company emerging as the sole importer of fuel in the current scenario.

Despite higher petrol imports in the first half of 2023 compared to the previous year, the decline in June, July, and August underscores the profound impact of subsidy removal on import dynamics, affirming the NBS’s latest findings.

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Crude Oil

Nigeria’s Oil Rig Count Soars From 11 to 30, Says NUPRC CEO

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The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, has announced a surge in the country’s oil rig count.

Komolafe disclosed that Nigeria’s oil rigs have escalated from 11 to 30, a substantial increase since 2011.

Attributing this surge to concerted efforts by NUPRC and other governmental stakeholders, Komolafe highlighted the importance of instilling confidence, certainty, and predictability in the oil and gas industry.

He explained the pivotal role of the recently implemented Petroleum Industry Act (PIA), which has spurred significant capital expenditure amounting to billions of dollars over the past two and a half years.

Speaking in Lagos after receiving The Sun Award, Komolafe underscored the effective discharge of NUPRC’s statutory mandate, which has contributed to the success stories witnessed in the sector.

The surge in Nigeria’s oil rig count signifies a tangible measure of vibrant activities within the upstream oil and gas sector, reflecting increased drilling activity and heightened industry dynamism.

Also, Komolafe noted that NUPRC has issued over 17 regulations aimed at enhancing certainty and predictability in industry operations, aligning with the objectives outlined in the PIA.

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