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Nigerian Equities Market Records Third Consecutive Weekly Decline

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  • Nigerian Equities Market Records Third Consecutive Weekly Decline

Respite is yet to come for investors in the Nigerian equities market as the market continued its bear run for the third consecutive week. In fact the market recorded its highest decline since July 22. The benchmark index, the Nigerian Stock Exchange (NSE) All-Share Index (NSE ASI) fell by 3.0 per cent to close at 26,170.88, while market capitalisation shed N279.1 billion to close at N9 trillion.

Market operators said the huge decline in the market was due to price depreciation in the shares of high-capped stocks across consumer goods, cement and banking sectors was responsible for the huge loss.

“Continued downward valuation revisions following the announcement of the widely unimpressive July-September corporate earnings — and exacerbated by the weak prospect of a recovery in the near term — may have contributed to the selloffs in the latter sectors,” analysts at Cordros Capital said.

Looking ahead, they said a sustainable recovery in equities will remain constrained by a subdued macro which has sent the local and foreign institutional investors (accounting for 80 per cent of total monthly trades) on sabbatical.

“The NSE ASI is expected to close positive this week, however, on likely recovery in the shares of some of the high-capped stocks that lost last week,” they added.

Daily Market Performance Summary

A decline in a number of highly capitalised stocks depressed the equity market to open the week on a bearish note on Monday. The Nigerian Stock Exchange All Share Index (NSE ASI) depreciated by 0.35 per cent to close at 26,887.54. Specifically, the depreciation recorded in the share prices of United Bank for Africa, Unilever, Access Bank, Transcorp and GTBank were responsible for the decline recorded on the first day of trading.

Investors traded N115 million shares worth N1.16 billion, down by 4.64 per cent from N1.21 billion the previous trading day. The three most actively traded sectors were: Financial Services (96.09 million shares), Conglomerates (5.27 million shares) and, Oil & Gas (4.36 million shares), while the most actively traded stocks were: UBA (21.49 million shares), GT Bank (17.75 million shares) and Zenith Bank (11.72 million shares).

All sector indices trend Southwards on Monday led by the NSE Banking Index, shedding 1.5 per cent on account of declines in GTBank (-3.2 per cent) and Access Bank (-1.3 per cent). The NSE Insurance Index trailed, losing 1.4 per cent while the NSE Industrial Goods Index declined 0.2 per cent. The NSE Consumer Goods and NSE Oil & Gas indices went down by 0.1 per cent apiece.

The bearish trend in worsened on Tuesday as the NSE ASI dipped 1.9 per cent to close at 26,364.27 points, while market capitalisation shed N180.1 billion to close at N9.1 trillion.

Losses sustained in the shares of Dangote Cement (-4.9 per cent), Lafarge Africa Plc (-4.9 per cent) and GTBank (-2.1 per cent) dragged market performance. However, market activity improved as volume and value traded rose by 64.3 per cent and 38.3 per cent to settle at 189.0 million shares and N1.6 billion respectively. The three most actively traded stocks were: Chams (40.10 million shares), UBA (28.61 million shares) and Transcorp (18.04 million shares).

In terms of sectoral indicators, only the NSE Consumer Index rose by 0.52 per cent, while the remaining closed lower. The NSE Industrial Goods Index slumped 4.5 per cent trailed by NSE Oil & Gas Index with a decline of 1.3 per cent. The Banking Index went down by 1.2 per cent while the NSE Insurance Index lost 0.4 per cent.

The bears remained in control of the market on Wednesday with the NSE ASI falling by 0.72 per cent to close at 26,173.69. Also the total value of stocks went down by 35.2 per cent to N1.04 billion, from N1.60 billion recorded the previous day, while to volume of stocks traded was 146.11 million shares in 3,039 deals.

The stock market rebounded on Thursday helped by gains recorded by banking stocks. The NSE ASI appreciated by 0.18 per cent to close at 26,221.75. Similarly, market capitalisation added N16.5 billion to close at N9.0 trillion.

Guaranty Trust Bank Plc, Zenith Bank Plc, Access Bank Plc and United Bank for Africa Plc appreciated by 4.6 per cent, 3.4 per cent, 2.9 per cent and 2.4 per cent respectively.

GTBank Plc, Zenith Bank Plc, Access Bank Plc, UBA and Union Bank of Nigeria Plc are among banks that posted improved results for the nine months ended September 30, 2016.

For instance, GTBank reported a jump of 59 per cent in profit after tax (PAT) to N119.9 billion, following a major boost from foreign exchange (fx) revaluation gains.

The bank reported gross earnings of N329.284 billion, up by 43.5 per cent compared with N229.4 billion in the corresponding period of 2015.

The NSE Banking Index was the only gainer on Thursday, rising by 3.1 per cent on the back of price appreciation by the banking stocks.

The NSE Oil & Gas Index went down (-3.7 per cent), dragged by Forte Oil Plc (-8.5 per cent), Total (-8.2 per cent), Mobil Oil (-2.6 per cent) and Oando(-1.4 per cent). Likewise, the NSE Consumer Goods Index shed 0.5 per cent on the back of sell offs in Nigerian Breweries Plc (-1.1 per cent), Seven-Up Bottling Company Plc (-5.0 per cent) and Cadbury Nigeria (-9.7 per cent). The NSE Insurance Index closed 0.2 per cent lower, while the NSE Industrial Goods Index closed flat.

The gains recorded on Thursday were reversed on Friday as the bulls could not sustain their hold on the market. As a result, the NSE ASI went down by 0.19 per cent to close the week at 26,170.88. The depreciation recorded in the share prices of Lafarge Africa, FBN Holdings, Stanbic IBTC, Transcorp and GTBank were responsible for the loss recorded in the NSE ASI.

The total value of stocks traded rose by 165.8 per cent to N2.63 billion on Friday, from N990.95 million shares the previous day. The three most actively traded stocks were: Standard Alliance Insurance (2.11 billion shares), Zenith Bank (22.39 million shares) and Sterling Bank (18.58 million shares).

Market turnover

The unprecedented jump in volume of shares on Friday lifted the overall weekly turnover to 2.847 billion shares worth N7.420 billion in 16,065 deals, up from the 873.838 million shares valued at N8.024 billion that exchanged hands the previous week.

The Financial Services Industry led the activity chart with 2.632 billion shares valued at N4.935 billion traded in 10,882 deals, thus contributing 92.48 per cent and 66.51 per cent to the total equity turnover volume and value respectively. The ICT Industry followed with 105.401 million shares worth N52.702 million in 11 deals. The third place was occupied by the Conglomerates Industry with a turnover of 36.495 million shares worth N44.162 million in 446 deals.

Also a total of 73,694 units of Federal Government Bonds valued at N80.177 million were traded in nine deals compared to a total of 13,020 units of Federal Government Bonds valued at N12.953 million transacted the previous week in 14 deals.

Similarly, a total of 5,080 units of Exchange Traded Products (ETPs) valued at N62, 550.75 executed in 17 deals, compared with a total of 56,688 units valued at N817,310.72 transacted last week in 31 deals

Gainers and losers

Meanwhile, 18 equities appreciated in price last week, lower than 24 equities of the previous week. Conversely, 36 equities depreciated in price, compared with 37 equities of the previous week.

Airline Services and Logistics Plc led the price gainers with 19.6 per cent, trailed by Wema Bank Plc with 10.5 per cent, while Livestock Feeds Plc and Eterna Plc went up by 9.5 per cent apiece. Guinness Nigeria Plc and Red Star Express Plc garnered 7.1 per cent each, while Pharma-Deko Plc, Ikeja Hotel Plc and International Breweries Plc appreciated by 4.8 per cent, 4.7 per cent and 4.6 per cent in that order.

Conversely, Cement Company of Northern Nigeria Plc led the price losers, shedding 14.3 per cent, trailed by National Aviation Handling Company Plc and Cadbury Nigeria Plc with a loss of 14.1 per cent each. Forte Oil Plc, Lafarge Africa Plc and Champion Breweries Plc declined by 12.7 per cent, 12.5 per cent and 10.2 per cent respectively.

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 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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