Analysts Predict Bullish Outlook For Equities, Fixed Income
Capital market analysts say the equities and fixed income markets are likely to see a relative bullish response this week.
The equities market closed last week on a positive note after recording declines in the first three days of the week (aside from Monday, which was a national holiday).
At last week’s close, the Nigerian Stock Exchange All-Share Index rode on the improving appeal for banking stocks to close positive.
“With the appeal still quite decent, coupled with waning bearish sentiment across other sectors, we expect the index to open higher in the week ahead,” analysts at Vetiva Capital Management said in the firm’s week-end market report.
For the fixed income market, the analysts said, “At the start of this week, we expect buoyant demand to further drive bullish trading in the Treasury bills space amid continued muted trading sentiment on bonds.”
The Nigerian equity market started the year on negative footing with the NSE ASI down 2.32 per cent amid light trade volumes. After opening in negative territory, the market maintained its bearish momentum as all key sectors continually closed in the red.
However, on Thursday, the financial services sector logged the first positive close of the key sectors following gains across select tier-one banks. Despite this, the market still closed lower as the ASI performance was skewed by a loss in Dangote Cement Plc.
At the week close, the ASI clinched its first gain of the year, amid extended gains across banking stocks and waning negative sentiment in other key sectors.
The fixed income market opened the year on a mixed note. At last week’s open, the Central Bank of Nigeria auctioned N51bn (offered: N50bn) across the 184 day-to-maturity and 352DTM bills. Despite the liquidity mop up, the treasury bill yields declined – supported by buoyant demand across the space, analysts said.
The treasury bills market sustained the bullish trend throughout the week amid a Primary Market Auction, where the CBN sold N35bn, N23bn, and N135bn (offered: N28bn, N42bn and N55bn) across the 91DTM, 182DTM and 364DTM bills at respective stop rates of 14 per cent, 17.50 per cent and 18.69 per cent (effective yield: 14.51 per cent, 19.17 per cent and 22.97 per cent).
However, the bond market traded bearish throughout the week with yields advancing by 97 basis points overall as the wait for the bond auction calendar kept investors on the sidelines.
To this end, analysts at Meristem Securities Limited, in its weekly report, maintained, “Given investors’ apathy towards the equities market in 2016, coupled with the dearth of positive news inflows amidst unfavourable economic fundamentals, we do not anticipate a revamp in market performance in the near term.
“However, we anticipate some position taking in fundamentally justified stocks currently trading below their intrinsic values.”
Meanwhile, global markets traded mostly higher in the first trading week of the year amid holiday-thinned trading and a barrage of data releases. Whilst most major markets were shut last Monday for the New Year’s holiday, the South Korean bourse traded mixed amid better-than-expected trade data and as investors continued to track events on the political scene.
On the other hand, the European markets closed the first trading week of the year higher on the back of upbeat 2016 Manufacturing Purchasing Managers’ Index data.
The Drop in US Crude Oil Inventories Boosted Oil Prices on Wednesday
Crude oil prices rose on Wednesday following a decline in US crude inventories last week.
The American Petroleum Institute (API) had reported that United States crude oil inventories declined by 5.3 million barrels in the week ended January 22, 2021, more than a reduction of 430,000 barrels predicted by a Reuters poll.
The unexpected decline, coupled with slowing new COVID-19 cases in China, the world’s largest importer of crude oil, boosted oil prices on Wednesday.
Brent crude, against which Nigerian crude oil is measured, rose by 41 cents or 0.7 percent to $56.32 per barrel.
The U.S. West Texas Intermediate (WTI) crude oil also gained 56 cents or 1 percent to $53.17 a barrel.
“WTI is slightly firmer on the back of a larger-than-expected draw in US crude inventories reported by the API, which is offset by builds in gasoline and distillates,” said Vandana Hari, oil market analyst at Vanda Insights.
The data, however, showed petrol inventories grew by 3.1 million barrels in the week, more than experts projected.
Similarly, API data revealed that distillate fuel inventories that include diesel and heating oil, jumped by 1.4 million barrels, far higher than the 361,000 barrels decline predicted. However, refinery runs declined by 76,000 barrels per day.
“Market participants are now in ‘wait and see’ mode, wanting to see how lockdowns evolve in the coming weeks and months, and how successful countries are in rolling out Covid-19 vaccines,” ING economics said in a note.
COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020
Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.
This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.
In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.
The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.
Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.
She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.
She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.
Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.
“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.
Crude Oil, Other Commodities Closing Price for Monday
Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.
Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.
The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.
Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.
News4 weeks ago
Heartbroken American Mistress Displays Dangote’s Buttocks in a Viral Video
News4 weeks ago
FCMB Group MD Links to Death of Tunde Thomas, Husband of Married Staff He Fathered Her Kids
Investment2 weeks ago
London Real Estate Company for African Investors Announces its Launch
Finance4 weeks ago
President Buhari Increases Npower Budget by N365 Billion
News4 weeks ago
Tunde Thomas: FCMB Commences Review Into Allegations of Unethical Behavior Against MD Nuru
Brands4 weeks ago
Prada’s Profits Drop by $219 Million, Sales in China Up by 60%
Banking Sector3 weeks ago
FCMB Appoints Yemisi Edun as Acting Managing Director While Adam Nuru Proceeds on Leave
Government3 weeks ago
US Congress Declares Joe Biden as The 46th President of The United States After Trump Mob Left