When Donald Trump predicted on Monday that U.S. voters would deliver “Brexit plus, plus, plus” by handing him the presidency, financial markets dismissed the comment as another example of the Republican candidate’s trademark hyperbole.
Now they’re not so sure.
As stocks, bonds and currencies reeled on Wednesday in Asia amid vote tallies showing a path to victory for Trump, memories of the Brexit-induced market turmoil in June loomed large. After rallying over the past two days on bets for a Hillary Clinton presidency, Mexico’s peso plunged to a record and U.S. stock-index futures sank by the 5 percent limit.
“Markets have a real whiff of fear about them,” said Ray Attrill, the global head of foreign exchange at National Australia Bank Ltd. in Sydney. “The U.K. referendum is too fresh for markets to suspend their disbelief about the prospect of a Trump victory.”
With Trump projected to win key battleground states including Florida and North Carolina, indicating a much closer contest than expected, markets responded with some of their most violent reactions since Britain’s shock vote to leave the European Union. Traders across the world were glued to their screens, driving up volumes in Asia as prices moved with every new vote count.
“It does look like Trump was a little prescient to say this could be Brexit times whatever multiple he wants to throw on there,” said Brian Jacobsen, the chief portfolio strategist at Wells Fargo Funds Management LLC, which oversees $242 billion. “The polls completely got it wrong so far.”
The Mexican peso, which tends to weaken as Trump’s prospects improve, sank 11 percent against the dollar at 1:35 p.m. in Hong Kong while the MSCI Asia Pacific Index of shares dropped 2.4 percent and oil sank 2.9 percent. U.S. Treasuries, the yen and gold all soared.
“This election is much closer than anyone expected,” said Bret Barker, head of U.S. fixed-income at TCW Group Inc., which manages $185 billion. “Once the baton is passed to politics, this is a prime example of how volatile markets can be.”
Some investors had prepared for the worst. Data from volatility markets suggests they spent liberally on hedging instruments, with outstanding futures on the CBOE Volatility Index climbing steadily since June.
“If you’re a trader, you hedged your bets,” Quincy Krosby, a market strategist at Prudential Financial Inc. in Newark, New Jersey, said by phone. “You didn’t go into this expecting a clean sweep for Democrats.”
Nader Naeimi, who runs a dynamic investment fund for AMP Capital Investors Ltd. in Sydney, had anticipated a Clinton win, betting on weaker yen and gains in global bank shares. But he also hedged those positions with options that shield about 70 percent of his equity holdings from declines.
“Now I’m glad we bought portfolio protection,” said Naeimi, whose firm oversees about $119 billion.
While U.S. equities will open “sharply” lower on Wednesday if Trump wins, that doesn’t necessarily mean long-term declines are in the offing, said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $110 billion.
Gains or losses in the S&P 500 Index in the first 24 hours after presidential elections have predicted the market’s direction 12 months later less than half the time, according to data compiled by Bloomberg. While almost $4 trillion was erased from global shares in the knee-jerk reaction to Brexit, equity markets recovered within a month.
Optimists can take heart from falling odds on a Federal Reserve interest-rate increase in December. The market-implied chance of a hike has plunged to about 50 percent, data compiled by Bloomberg show.
“We have to look past the short-term volatility,” Bittles said. “After the election, investors will be focusing on the Fed and what they’re going to do in December.”
SEC To Ban Unregistered CMOs From Operating By Month End
The Securities and Exchange Commission (SEC) says it will stop operations of Capital Market Operators (CMOs) that are yet to renew their registration on May 31, 2021.
This was contained in a circular signed by the management of SEC in Abuja on Monday.
On March 23, SEC had informed the general public and CMOs on the reintroduction of the periodic renewal of registration by operators.
The commission noted that the reintroduction of the registration renewal was due to the need to have a reliable data bank of all the CMOs registered and active in the country’s capital market.
“To provide updated information on operators in the Nigerian Capital Market for reference and other official purposes by local and foreign investors, other regulatory agencies and the general public, to increasingly reduce incidences of unethical practices by CMOs such as may affect investors’ confidence and impact negatively on the Nigerian Capital Market and to strengthen supervision and monitoring of CMOs by the Commission,” SEC explained.
According to the circular, the commission said CMOs yet to renew their registration at the expiration of late filing on May 31, would not be eligible to operate in the capital market.
It explained that CMOs were required to have completed the renewal process on or before April 30, however, the commission said late filing for renewal of registration would only be entertained from May 1 to May 31.
SEC also said that asides from barring the CMOs who failed to comply accordingly, their names would be published on its website and national dailies.
It added that names of eligible CMOs would be communicated to the relevant securities exchanges and trade associations.
A Threat to Revenue As Nigeria’s Largest Importer of Crude, India slash Imports By $39.5B
Nigeria’s revenue earning capacity has come under threat following the reduction of importation of crude oil by India.
India, Nigeria’s largest crude oil importer, reduced crude oil imports by $39.5bn in April, compared to the same time the previous year, data from India’s Petroleum Planning & Analysis Cell showed.
According to the Indian High Commission in Nigeria, India’s crude oil imports from Nigeria in 2020 amounted to $10.03bn.
This represented 17 percent of Nigeria’s total crude exports for the year according to the Nigerian National Petroleum Corporation, as quoted by OilPrice.com.
As Nigeria’s largest importer of crude oil, lockdowns in India’s major cities from the COVID-19 surge in April had ripple effects on Nigeria’s oil sales.
The NNPC was prompted to drop the official standard price of its main export streams, Bonny Light, Brass River, Erha, and Qua Iboe, by 61-62 cents per barrel below its April 2021 prices. They traded at $0.9, $0.8, $0.65, $0.97 per barrel respectively, below dated Brent, the international benchmark, as Oilprice.com showed.
India had been buying the not-too-light and not-too-heavy Nigerian crudes that suited its refiners.
Reuters reported that the Indian Oil Corporation’s owned refineries were operating at 95 percent capacity in April, down from 100 percent at the same time the previous month.
An official at the IOC was quoted as saying, “If cases continue to rise and curbs are intensified, we may see cuts in refinery runs and lower demand after a month.” Hundreds of seafarers risked being stuck at sea beyond the expiry of their contracts, a large independent crude ship owner reportedly told Bloomberg.
India reportedly bought more American and Canadian oil at the expense of Africa and the Middle East, reducing purchases from members of the Organisation of the Petroleum Exporting Countries to around 2.86 million barrels per day.
This squeezed the group’s share of imports to 72 percent from around 80 percent previously, as India’s refiners were diversifying purchases to boost margins, according to Reuters.
India also plans to increase local crude oil production and reduce import expenses as its population swells, according to Bloomberg.
A deregulation plan by the Narendra Modi-led government to boost national production to 40 million tonnes of crude oil by 2023/2024, an increase of almost eight million tonnes, had already been initiated.
According to Business Today, an Indian paper, the country currently imports 82 percent of its oil needs, which amounted to $87bn in 2019.
Invest Africa and DLA Piper Partner to Support ESG Best Practice in African Renewable Energy Projects
The global law firm, DLA Piper, has partnered with Invest Africa, the leading trade and investment platform for African markets, to support the development of ESG best practice in African renewable energy projects.
Clear Environmental, Social and Governance (ESG) targets and measurements have become an increasingly important part of fundraising as investors seek to align their portfolios with sustainable growth. For a continent boasting ample natural resources, this presents a significant opportunity for Africa’s green energy sector. However, renewable does not always equal sustainable and developing and articulating ESG metrics can pose a significant challenge to projects as they prepare investment rounds.
The project will assemble experts from the worlds of impact investment, development finance and law. Across a series of online meetings, participants will discuss strategies to improve ESG practices in African renewable projects from both a fundraising and operational perspective.
Amongst those speaking in the inaugural session on Thursday 13th May are Cathy Oxby, Chief Commercial Officer, Africa Greenco, Dr. Valeria Biurrun-Zaumm, Senior Investment Manager, DEG, Orli Arav, Managing Director – Facility For Energy Inclusion (FEI) – Lion’s Head Global Partners, Beatrice Nyabira, Partner, DLA Piper Africa, Kenya (IKM Advocates) and Natasha Luther-Jones, Partner, Global Co-Chair of Energy and Natural Resources, International Co-Head, Sustainability and ESG, DLA Piper.
Veronica Bolton-Smith, COO of Invest Africa said, “Africa is particularly vulnerable to the impact of climate change despite contributing very little to global emissions. As the price of renewables fall, they will form an ever more important part of Africa’s electrification. In this context, it is essential that projects be given the tools to apply best practice in ESG not only from an environmental perspective but also in terms of good governance, fair working conditions and contribution to social inclusion. I look forward to working closely with DLA Piper on this important topic.”
Natasha Luther-Jones, Global Co-Chair Energy and Natural Resources and International Co-Head Sustainability and ESG at DLA Piper also commented, “Climate change is one of the biggest challenges companies, and people, face today and when we look at its reduction – whether that be in how we power our devices, what we eat or how we dress, where we live or how we work – all roads come back to the need to increase the amount of accessible, and affordable, clean energy. However, renewable energy companies are not automatically sustainable as sustainability is a focus on all ESG factors, not just environmental. We know the need for renewable energy is only going to continue to rise, and therefore so will the number and size of renewable energy companies. The additional challenge is to make sure they are truly sustainable organisations and that’s what we’re excited about discussing during the webinar.”
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