- Stock Market Gains N156bn on Renewed Investor Sentiment
It was another bullish week for equities investors as the market rode on the continued positive sentiments to gain N156.2 billion. The market, which had previously recorded its highest weekly gain, rallied further last week on persistent investors’ positive reactions to first quarter (Q1) earnings reported by companies. The Nigerian Stock Exchange (NSE) All-Share Index (NSE ASI) rose by 1.85 per cent to close at 26,235.63, while market capitalisation appreciated by same margin to close higher at N9.069 trillion.
Similarly, all other Indices finished higher during the week with the exception the NSE Insurance and NSE Industrial Goods Indices that depreciated by 0.09 per cent and 1.04 per cent respectively while the NSE ASeM Index closed flat.
The NSE Banking Index appreciated by 3.6 per cent, followed by the NSE Consumer Goods and NSE Oil & Gas Indices with 3.0 per cent apiece.
However, on the contrary, the Industrial Goods Index declined 1.1 per cent, just as the NSE Insurance Index recorded 0.1 per cent.
Analysts at Afrinvest said the market performance was driven by “swirls of positive sentiment, which emanated from the impressive Q1 earnings and expectations of a rebound in economic activities following positive PMI readings for April and improved FX liquidity.”
Daily Market performance
The market commenced the week and new month on a positive note on Tuesday as the NSE ASI appreciated by 0.80 per cent to close at 25,965.18. The gain recorded could be attributed to the renewed investor sentiments witnessed in the market from last week, coupled with some impressive Q1:2017 earnings releases which drove the positive reactions. Specifically, sustained interest in market bellwethers such as Zenith Bank, Nestle Nigeria, Guaranty Trust Bank and Seplat contributed to the positive performance.
Performance across sectors was broadly positive as all indices closed in the green save for the NSE Industrial Goods Index which stagnated. The NSE Banking Index appreciated the most, rising by 1.5 per cent due to gain by Zenith Bank (+3.7 per cent) and GTBank (+1.4 per cent) while the NSE Oil & Gas Index went up 1.4 per cent followed gains by Seplat (+3.7 per cent) and Oando (+4.8 per cent). Similarly, the NSE Consumer Goods Index and NSE Insurance indices closed 0.9 per cent and 0.02 per cent higher on the back of rally in Nestle (+2.5%) and WAPIC Insurance (+4.0 per cent) in that order.
At the end of trading, 22 stocks added value compared with 12 decliners. The gainers’ chart was led by Fdison (+9.1 per cent), NPF Microfinance Bank (+9.1 per cent) and FBN Holdings Plc (+5.4%).
Conversely, UACN of Nigeria Plc, Forte Oil Plc and AIICO Insurance shed 5.0 per cent, 4.2 per cent and 3.8 per cent respectively.
The market appreciated further as the bulls consolidated their hold on the market. The NSE ASI appreciated by 0.58 per cent to close at 26,116.79. The appreciation recorded in the share prices of Zenith Bank, Nigerian Breweries, Access Bank, FBN Holdings and UBA were mainly responsible for the gain recorded in the Index.
Market performance was broadly bullish as all sector indices closed in the green. The NSE Banking Index advanced the most, chalking up 1.5 per cent on the back of price appreciation in UBA (+6.3 per cent) and Zenith Bank (+1.6 per cent).
The NSE Oil & Gas Index added 0.6 per cent on account of gains in Oando (+7.9 per cent) and Forte Oil(+2.3 per cent). Likewise, the NSE Consumer Goods Index and Insurance indices trended northwards by adding 0.4 per cent and 0.3 per cent respectively. The NSE Industrial Goods Index closed unchanged.
The stock market recorded gains for the fifth consecutive trading session on Thursday as investors continued to take position in large cap stocks on the exchange. Consequently, the NSE ASI closed 0.20 per cent higher to settle at 26,166.80, reducing the year-to-date decline to 2.6 per cent. Also, the market capitalisation added N18 billion to close at N9.Investors gained N18.0bn as market capitalisation rose to N9.0 5 trillion. The positive close was majorly driven by gains in Nigerian Breweries Plc, Zenith Bank and International Breweries Plc.
A total of 26 stocks advanced while 15 declined. International Breweries Plc led the price gainers with 9.3 per cent trailed by Fidson Healthcare with 9.1 per cent, while NAHCO appreciated by 4.8 per cent.
Conversely, Stanbic IBTC Bank Plc led the price losers with 9.6 per cent, while Unity Bank Plc shed 7.4 per cent. AXA Mansard Insurance Plc went down by 4.5 per cent.
“Considering the positive momentum witnessed since the start of the week, we expect the market to close the week positive; however, we do not rule out the possibility of some “end of the week” profit-taking by investors in the trading session ahead,” analysts at Afrinvest (W.A) said.
The recorded its fourth consecutive gain on Friday adding 0.19 per cent to bring the total growth for the week to 1.85 per cent.
Meanwhile, investors traded 1.154 billion shares worth N10.439 billion in 16,676 deals , compared with 1.333 billion shares valued at N9.671 billion that exchanged hands the previous week in 16,300 deals.
The Financial Services Industry maintained its lead on the activity chart with 813.016 million shares valued at N6.904 billion traded in 10,298 deals; thus contributing 70.45 per cent and 66.13 per cent to the total equity turnover volume and value respectively. The Oil and Gas Industry followed with 106.566 million shares worth N1.063 billion in 1,356 deals. The Services Industry occupied the third position with a turnover of 90.940 million shares worth N188.204 million in 660 deals.
Also traded during the week were a total of 20 units of Exchange Traded Products (ETPs) valued at N110,000.00 executed in one deal compared with a total of 533 units valued at N32,204.30 transacted in the preceding week in 15 deals.
Similarly, a total of 1,582 units of Federal Government Bonds valued at N1.608 million were traded this week in 10 deals, compared with a total of 4,705 units valued at N3.934 million transacted two weeks ago in four deals.
Price Gainers and Losers
The price movement chart showed 43 advancers higher than the 38 equities of the previous week, while 16 equities depreciated in price, lower than 25 equities of the previous week.
Fidson Healthcare Plc led the price gainers’ chart with 43.6 per cent. Oando Plc trailed with 24 per cent, while Livestock Feeds Plc appreciated by 16.2 per cent.
Nigerian Aviation Handling Company Plc, chalked up 15.2 per cent, just as Newrest ASL Nigeria Plc and FBN Holdings Plc garnered 14.2 apiece. Other top price gainers were: May & Baker Nigeria Plc (14.1 per cent); Transcorp Plc (11.3 per cent); International Breweries Plc (10.4 per cent) and Cutix Plc (9.5 per cent).
Conversely, Unity Bank Plc led the price losers with 13.7 per cent, trailed by Champion Breweries Plc with 8.9 per cent decline. Stanbic IBTC Holdings Plc went down by 6.6 per cent, just as NASCON Allied Industries Plc and AXA Mansard Insurance Plc shed 5.7 per cent each.
Medview Airline Plc and Jaiz Bank Plc declined by 4.6 per cent and 4.3 per cent respectively. Others were: Honeywell Flour Mills Plc (4.2 per cent); Sterling Bank Plc (4.1 per cent); and Total Nigeria Plc (3.04).
Oil Rises as Threat of Immediate Iran Supply Recedes
Oil prices rose on Tuesday, with Brent gaining for a fourth consecutive session, as the prospect of extra supply coming to the market soon from Iran faded with talks dragging on over the United States rejoining a nuclear agreement with Tehran.
Indirect discussions between the United States and Iran, along with other parties to the 2015 deal on Tehran’s nuclear program, resumed on Saturday in Vienna and were described as “intense” by the European Union.
A U.S. return to the deal would pave the way for the lifting of sanctions on Iran that would allow the OPEC member to resume exports of crude.
It is “looking increasingly unlikely that we will see the U.S. rejoin the Iranian nuclear deal before the Iranian Presidential Elections later this week,” ING Economics said in a note.
Other members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia — a group known as OPEC+ — have been withholding output to support prices amid the pandemic.
“Additional supply from OPEC+ will be needed over the second half of this year, with demand expected to continue its recovery,” ING said.
To meet rising demand, U.S. drillers are also increasing output.
U.S. crude production from seven major shale formations is forecast to rise by about 38,000 barrels per day (bpd) in July to around 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said in its monthly outlook.
Oil Prices Rise as Demand Improves, Supplies Tighten
Oil prices rose on Monday, hitting their highest levels in more than two years supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate.
Brent was up 53 cents, or 0.7%, at $73.22 a barrel by 1050 GMT, its highest since May 2019.
U.S. West Texas Intermediate gained 44 cents, or 0.6%, to $71.35 a barrel, its highest since October 2018.
“The two leading crude markers are trading at (almost) two-and-a-half-year highs amid a potent bullish cocktail of demand optimism and OPEC+ supply cuts,” said Stephen Brennock of oil broker PVM.
“This backdrop of strengthening oil fundamentals have helped underpin heightened levels of trading activity.”
Motor vehicle traffic is returning to pre-pandemic levels in North America and much of Europe, and more planes are in the air as anti-coronavirus lockdowns and other restrictions are being eased, driving three weeks of increases for the oil benchmarks.
The mood was also buoyed by the G7 summit where the world’s wealthiest Western countries sought to project an image of cooperation on key issues such as recovery from the COVID-19 pandemic and the donation of 1 billion vaccine doses to poor nations.
“If the inoculation of the global population accelerates further, that could mean an even faster return of the demand that is still missing to meet pre-Covid levels,” said Rystad Energy analyst Louise Dickson.
The International Energy Agency (IEA) said on Friday that it expected global demand to return to pre-pandemic levels at the end of 2022, more quickly than previously anticipated.
IEA urged the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to increase output to meet the rising demand.
The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020, maintaining strong compliance with agreed targets in May.
On the supply side, heavy maintenance seasons in Canada and the North Sea also helped prices stay high, Dickson said.
U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report.
It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.
FG Spends N197.74 Billion on Subsidy in Q1 2021
The Federal Government has spent a total sum of N197.74 billion on fuel subsidy in the first quarter (Q1) of 2021, according to the Federal Account Allocation Committee (FAAC) report for May.
The report noted that the value of shortfall, the amount the NNPC paid as subsidy, in the March receipts stood at N111.97 billion while N60.40 billion was paid in February.
In the three months ended March, the Federal Government spent N197.74 billion on subsidy.
The increase in subsidy was a result of rising oil prices, Brent crude oil, against which Nigerian oil is priced, rose to $73.13 per barrel on Monday.
The difference in landing price and selling price of a single litre is the subsidy paid by the government.
On May 19, the Nigerian Governors Forum suggested that the Federal Government removed the subsidy completely and pegged the pump price of PMS at N380 per litre.
The governors’ suggestion followed the non-remittance of the NNPC into the April FAAC payments, the money required by most states to meet their expenditure such as salaries and building of infrastructure.
However, experts have said Nigeria is not gaining from the present surge in global oil prices given the huge money spent on subsidy.
Kalu Aja, Abuja-based financial planner and economic expert, said “If Nigeria is importing Premium Motor Spirit and still paying subsidy, then there is no seismic shift.”
“Nigeria needs oil at $130 to meet the deficit. In the short term, however, more dollar cash flow is expected and with depreciated Naira, it will reduce short term deficit.”
Adedayo Bakare, a research analyst, said that the current prices do not really mean much for the country economically.
He said, “The ongoing transition away from fossil fuels and weak oil production from the output cuts by the Organisation of Petroleum Exporting Countries will not make the country benefit much from the rising oil prices.
“Oil production used to be over two million barrels but now around 1.5 million barrels. We need OPEC to relax the output cuts for the naira to gain.”
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