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Market Sheds 0.3% on Profit Taking

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  • Market Sheds 0.3% on Profit Taking

The Nigerian stock market closed on a negative note last week as profit taking halted a four week rally. The market had in the previous week hit a record high following an unprecedented surge in investors’ appetite for risk assets. While the Nigerian Stock Exchange (NSE) All-Share Index surged 7.46 per cent, the market capitalisation added N676 billion.

However, attempts by some investors to realise part of the capital gains recorded the previous week led to a decline in the benchmark index closing the week 0.28 per cent lower at 28,113.38, while market capitalisation ended at N9.719 trillion.

Similarly, all other indices finished lower except the NSE Premium, NSE Main Board, NSE Banking, NSE Insurance and the NSE Pension indices that appreciated by 3.05 per cent, 0.23 per cent, 0.38 per cent and 0.97 per cent while the NSE ASeM Index closed flat.

The negative close notwithstanding, analysts at Cordros Capital Limited, said: “Fundamentally, the market remains strong, particularly in light of improved stability and liquidity in the currency space, and the government’s recent progress in creating and harnessing growth and stability in the Nigerian economy.”

Daily Market performance

The first day of the week saw investor besiege the market to lock in profits recorded in the previous week. Consequently, the NSE ASI declined by 2.41 per cent to close at 27,513.69, while market capitalisation shed N234.6 billion to close lower at N9.5 trillion.

Activity level also fell with volume and value shares traded declining by 36.9 per cent and 13.9 per cent to 671.0 million units and N7.9 billion respectively.

There were only 10 price gainers and 41 price losers. Law Union and Rock Insurance Plc led the price gainers, trailed by Presco Plc with 4.2 per cent appreciation. Dangote Cement Plc chalked up 4.16 per cent, while Linkage Assurance Plc and UAC of Nigeria Plc rose 3.85 per cent ND 3.04 per cent respectively among others.

The price losers’ table was led by Oando Plc with a decline of 9.6 per cent followed by Eterna Plc, which went down by 9.5 per cent. Fidson Healthcare Plc, Diamond Bank Plc and Zenith Bank Plc shed 9.3 per cent, 9.0 per cent, and 5.6 per cent in that order.

Analysts at Meristem Securities Limited, said: “We attribute the day’s loss to the much expected profit-taking activities on counters that had gained in the market’s recent rally. The day’s loss was tempered by the 4.16 per cent price appreciation of Dangote Cement Plc, as the market would have fared worse, ex-Dangote Cement (-4.88 per cent),” they said.

In terms of sectoral performance, all the sectors ended the day in red led by the NSE Oil & Gas Index that fell by 3.8 per cent following losses in Oando (-9.6 per cent) and Seplat (-5.0 per cent). The NSE Consumer Goods Index shed 3.7 per cent, while the NSE Banking Index, NSE Industrial Goods Index and Insurance Index went down by 3.3 per cent, 1.1 per cent and 1.0 per cent respectively.

However, the market rebounded on Tuesday with the benchmark index appreciated 0.4 per cent to settle at 26,609.67. Similarly, investors gained N33.2 billion as market capitalisation increased to N9.5 trillion. Performance across sectors was mixed as three of the five indices advanced. The NSE Consumer Goods Index appreciated the most, rising by 1.3 per cent on account of price appreciation in Nigerian Breweries (+2.4 per cent), Nestle (+0.3 per cent) and Flour Mills of Nigeria (+3.2 per cent). The NSE Banking Index followed, advancing 0.9 per cent on the back of gains in GTBank (+1.7 per cent), Access Bank (+2.4 per cent) and Zenith Bank (+0.6 per cent). In the same in vein, the NSE Industrial Goods Index trended 0.2 per cent northwards due to gains in CAP Plc (+4.4 per cent). On the negative side, the NSE Oil and Gas Index fell 3.4 per cent on the back of continuous profit taking in Seplat (-9.0 per cent) and Total (-1.5 per cent) while AIICO Insurance (-1.9 per cent) dragged the Insurance index (-0.1 per cent) southwards.

The bulls retained their hold on the market lifting the as the index rose 1.05 per cent to close higher at 27,900.44, while market capitalisation added N100.5 billion to close at N9.645 trillion. A total of 25 stocks appreciated compared with 13 that declined in value.

Bellwethers such as Nestle Nigeria, GTBank Plc, Nigerian Breweries were among the price gainers. However, Oando Plc led the table, chalking up 9.9 per cent. May & Baker Nigeria Plc closed as the second highest price gainer with 9.8 per cent, while Linkage Assurance Plc and Redstar Express Plc added 7.4 per cent and 4.9 per cent respectively.

Conversely, C & Leasing Plc led the price losers, shedding 8.2 per cent close at N0.67, trailed by Law Union and Rock Insurance Plc and Livestock Feeds Plc with 4.7 per cent apiece. Union Bank of Nigeria Plc and African Prudential Registrars Plc declined by 2.9 per cent and 2.1 per cent in that order.

The bulls dominated the equity market on Thursday with the index appreciating by 0.72 per cent to close at 28,101.63. The appreciation recorded in the share prices of FBN Holdings, GTBank, Nestle, Zenith Bank and UBA were mainly responsible for the gain recorded in the Index.

Similarly, the market capitalisation appreciated by 0.73 per cent to close at N9.71 trillion, compared with the appreciation of 1.05 per cent recorded on Wednesday.

Investors traded 353.14 million shares worth N9.16 billion, up by 162.48 per cent from N3.49bn recorded the previous day. The most actively traded sectors were: Financial Services (249.18 million), Consumer Goods(34.80 million) and Conglomerates (30.86 million), while the three most actively traded stocks were: Zenith Bank (63.20 million), FBNH (35.74 million) and Transcorp (30.52 million)

Market turnover

By the end of the week, investors traded 2.271 billion shares worth N32.647 billion in 20,710 deals compared to a total of 3.255 billion shares valued at N28.738 billion that exchanged hands the previous week in 25,370 deals.

As usual, the Financial Services Industry remained the most active he activity chart with 1.843 billion shares valued at N17.715 billion traded in 12,119 deals; thus contributing 81.19 per cent and 54.26 per cent to the total equity turnover volume and value respectively. The Oil and Gas Industry followed with 119.755 million shares worth N5.198 billion in 2,599 deals. The third place was occupied by Conglomerates Industry with a turnover of 119.281 million shares worth N273.785 million in 1,109 deals.

Trading in the top three equities namely – Access Bank Plc, Zenith Bank Plc and FBN Holdings Plc accounted for 998.849 million shares worth N10.412 billion in 4,831 deals.

Also traded during the week were a total of 1,470 units of Exchange Traded Products (ETPs) valued at N10,128.30 executed in two deals compared with a total of 948 units valued at N16,591.16 transacted the previous week in 14 deals.

A total of 6,308 units of Federal Government Bonds valued at N5.481million were traded last week in three deals, compared with a total of 5,201 units valued at N5.400 million transacted last week in three deals.

Price Gainers and Losers

Meanwhile, 30 equities appreciated in price last week, lower than 57 equities of the previous week, while 31 equities depreciated in price, higher than 13 equities of the previous week.

May & Baker Nigeria Plc led the price gainers with 14.8 per cent to close at N1.47 per share. Linkage Assurance Plc trailed with a gain of 11.5 per cent. United Bank for Africa Plc, Oando Plc and Neimeth International Pharmaceuticals Plc garnered 9.6 per cent, 7.7 per cent and 7.5 per cent.

Other top price gainers were: N.E.M Insurance Plc(6.1 per cent); FCMB Group Plc(5.4 per cent); Transcorp Plc(5.2 per cent); GTBank and Red Star Express (5.0 per cent apiece).

Conversely, Newrest ASL Nigeria Plc led the price losers with 13.2 per cent, trailed by C & I Leasing Plc with 11.8 per cent. Diamond Bank Plc shed 11 per cent, while Eterna Plc and Cement Company of Northern Nigeria Plc depreciated by 8.7 per cent and 8.1 per cent in that order.

Other top price losers were: Seplat (8.1 per cent); Jaiz Bank Plc (8.0 per cent); Livestock Feeds Plc (7.8 per cent); UPDC (7.6 per cent); Fidson Healthcare (6.7 per cent.

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.

Energy

African Energy Developments Demand Sustained Investment With New Projects in Mozambique, Tanzania, Uganda, and Senegal

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Workers

In the past twelve months, the African energy sector has seen several encouraging developments – in the form of both Foreign Direct Investment (FDI) and strategic partnerships – that have advanced the sustainable development of its natural resources. In fact, despite a global downturn in investment in 2020, FDI flows to developing economies accounted for 72% of global FDI, the highest share to date. Given the magnitude of Africa’s oil and gas reserves – not to mention its abundant renewable resource wealth – the continent remains a highly attractive market for inbound investment, which is vital for its growth.

Take Uganda, for instance, which is home to one of the largest onshore discoveries in sub-Saharan Africa. Following multiple petroleum discoveries in Uganda’s Albertine Graben – estimated to contain 6.5 billion barrels of oil, of which 1.4 billion are considered recoverable – foreign investments into the country are expected to reach nearly $20 billion. Last April, Total E&P Uganda B.V. signed a Sale and Purchase Agreement with Tullow Oil PC, through which Total will acquire Tullow’s entire 33.34% interests in Uganda’s Lake Albert development project and the East African Crude Oil Pipeline (EACOP). Five months later, the Ugandan Government and Total signed a host government agreement for EACOP, representing a significant step toward reaching a final investment decision. The deal pushes along an extended development process – slowed by infrastructure issues, tax complications, then COVID-19 – that not only promises to bring first oil by 2022, but also provides a pathway to monetization via associated transport infrastructure.

In addition to developments at Lake Albert, the Ugandan Government has proven its commitment to attracting FDI to its hydrocarbon sector through its second licensing round held last year, as well as its invitation to local and foreign entities to forge joint-venture partnerships with the Government. By prioritizing the establishment of mutually beneficial partnerships, the emerging East African producer aims to facilitate the successful transfer of skills, knowledge and technology, initiating an influx of technical expertise and working capital into the country.

“Those who have been locked out from access to opportunity want the same from the energy sector that the energy sectors want from governments.  We must not forget local content, local jobs, local opportunities especially for young people and women” Stated NJ Ayuk Executive Chairman of the African Energy Chamber.

Meanwhile, in West Africa, Senegal has been reaping the rewards of a long-standing partnership with Germany, which has resulted in more than one billion Euros in funding, including significant support for small-scale power plants and renewable energy projects. Holding sizeable potential for solar and wind energy development, Senegal serves as a regional leader in renewable deployment as a means of rural electrification. Indeed, energy is a central component of poverty alleviation across Africa, with electricity access enabling greater independence, clean cooking and potable water, as well as dramatically improving the well-being of individuals, businesses and communities alike.  Rural populations are cognizant of the challenges posed by a lack of stable electricity supply – increased urban migration, lack of access to basic services, low economic competitiveness, to name a few – and distributed renewables can represent the fastest and least expensive path to electrification.

European interest in Senegal has shed light on and served as a model for co-operation opportunities between renewable-rich African countries and developed partners, which offer cutting-edge technologies and technical expertise to transform raw resources into viable off-grid and mini-grid solutions.

Furthermore, while the cost of deploying renewable technology has never been lower, the availability of renewable-focused capital has never been higher. Investment in commercial and industrial solar has demonstrated resilience against the pandemic, continuing to be seen as a safe investment in light of rising utility costs and increasing distribution of both solar and financial technologies. Yet resource potential and low costs of equipment are not enough; Senegal and other resource-rich African nations require active investor interest and strong government support to unlock diversified energy mixes. In turn, a lack of investment represents a pointed threat to the achievement of long-term energy security.

“Young people and women have shown their great resilience, and it is our hope we close these deals in the renewable energy sector, Africans can have a sense of some hope that they will be included in the industry contracts and opportunities. It is no longer correct for the African to be the last hired and the first fired” Concluded Ayuk.

Moreover, without sustained levels of FDI continuing to move the needle on oil, gas and renewable developments, energy export revenues run the risk of being stranded and resources left undeveloped. For emerging producers like Uganda – as well as Tanzania, Kenya, Mozambique, among several others – this would mean foregoing critical government revenues that could aid in a much-needed, post-COVID-19 economic recovery. FDI is vital to Africa’s growth, and while it may be challenging to procure capital in a tepid global economy, it is even more difficult not to. Yes, COVID-19 has put emerging producers in a tough spot: new exploration is seen as risky, and new producers lack existing assets or low-cost development of marginal fields on which to fall back. However, it is not an option to slow or postpone time-sensitive developments that promise to harness natural resource wealth and make sustainable improvements in standards of living across the continent. Africa requires a sustained flow of investment and has proven time and again that it offers the scope of projects and magnitude of resources that are worthy of foreign capital.

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Energy

Saudi Aramco’s Profit Halved in Two Years, Market Cap $210B Below Apple’s

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Even before the pandemic, the oil and gas industry was faced with slumping prices. However, with a record collapse in oil demand amid the lockdowns, the COVID-19 crisis has further shaken the market, causing massive revenue and market cap drops for even the largest oil companies.

According to data presented by Finaria.it, the net income of the world’s biggest oil producer and one of the largest publicly listed companies, Saudi Aramco, dropped to $49bn in 2020, a 55% plunge in two years.

The COVID-19 Crisis and Oil Price War Cut Profits by Almost $40B in a Year

In preparation for its IPO, which took place in December 2019, Saudi Aramco had published 2018 profits. With a net income of $111.1bn, Saudi Arabia’s state-run oil giant ranked as the most profitable publicly listed company in the world.

Global macroeconomic concerns like the US-China trade war and the oil overproduction set significant price drops even before the coronavirus outbreak. In 2019, the company reported a profit of $88.2bn, a 20% drop year-over-year.

However, a standoff between Russia and Saudi Arabia in the first months of 2020 sent prices even lower and caused a massive hit for Saudi Aramco’s profits.

After global oil demand plunged in March, Saudi Arabia proposed a cut in oil production, but Russia refused to cooperate. Saudi Arabia responded by increasing production and cutting prices. Shortly Russia followed by doing the same, causing an over 60% drop in crude oil prices at the beginning of 2020. Although OPEC and Russia agreed to cut oil production levels to stabilize prices a few weeks later, the COVID-19 crisis already hit.

In March, Saudi Aramco announced full-year figures for the second time since going public, and the results revealed huge financial losses. In 2020, Saudi Arabia’s state-run oil company reported a net income of $49bn, almost a $40bn drop in a year.

While Saudi Aramco was the most profitable publicly listed company globally in 2019, the current result puts the company behind Apple, which reported a net income of $57.4bn in 2020.

Saudi Aramco’s Market Cap $210B Below Apple’s

In December 2019, Saudi Arabia’s state-run oil giant completed its long-awaited IPO and hit a staggering $2 trillion valuation on the second day of trading, nearly one trillion higher than the world’s next-largest publicly listed companies Microsoft and Apple. The initial public offering was an essential part of Crown Prince Mohammed bin Salman’s Vision 2030 program to transform the Saudi economy.

However, Saudi Aramco’s stocks were outperformed by Apple in 2020. After plunging to $1.61trn in March last year, the market cap of the Dhahran-based company jumped to $2.15trn in September. By the end of the year, this figure slipped to $2.05trn. Statistics show that Saudi Aramco’s market cap floated around this value for the last three months and then dropped to $1.87trn in April after the company revealed the full-year results.

Although valued one trillion less than Saudi Aramco at the time of its IPO, the world’s largest tech company, Apple’s, has seen its market cap surge last year. In January 2020, the combined value of shares of the US tech giant stood close to $1.4trn. After plunging to $1.1trn in March, Apple’s market cap soared to over $2.3trn in December. Although this figure slipped to $2.08trn last week, it still represents almost a 90% increase in a year.

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Crude Oil

Oil Inches Higher But Rangebound as COVID-19 Cases Soar

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Oil prices edged higher in rangebound trade on Monday on optimism about a rebound in the U.S. economy as vaccinations accelerate, but rising COVID-19 cases in other parts of the world kept a lid on prices.

Brent was up 22 cents, or 0.4%, at $63.17 a barrel by 0843 GMT. West Texas Intermediate (WTI) U.S. crude rose 12 cents, or 0.2%, to $59.44 a barrel.

The prices have remained rangebound in the last three weeks, with Brent between $60 and $65 per barrel and WTI at $57 to $62.

“Oil prices are entering a consolidation phase after swinging wildly last month,” Stephen Brennock of oil broker PVM.

“While there are still plenty of reasons to be bullish, market players have become more cautious as infections have surged in Europe, India and some emerging markets, while vaccine rollouts have proved slower than anticipated,” he added.

India now accounts for one in every six daily infections worldwide, and other parts of Asia are seeing infection rates rise.

Asian oil demand remained weak and some buyers asked for lower volumes in May partly because of refinery maintenance and higher prices.

The United States has fully vaccinated more than 70 million people but U.S. gasoline demand has not picked up as much as expected.

The U.S. economy is at an “inflection point” amid expectations that growth and hiring will accelerate in the months ahead, but faces the risk of reopening too quickly and sparking a resurgence in coronavirus cases, Federal Reserve Chair Jerome Powell said in an interview broadcast on Sunday.

“There really are risks out there. And the principal one just is that we will reopen too quickly, people will too quickly return to their old practices, and we’ll see another spike in cases,” Powell said in a CBS interview, recorded on Wednesday.

On the production side, no new oil drilling rigs were started in the United States in the most recent week, a report published by Baker Hughes showed.

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