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Equity Rout Deepens, Bonds Rise on Korea Tension



U$27 Trillion Locked In Bear Markets
  • Equity Rout Deepens, Bonds Rise on Korea Tension

Stocks tumbled in Asia, following a U.S. slump overnight, as investors headed for havens from what hedge-fund manager Ray Dalio termed a game of chicken between U.S. and North Korean leaders.

Asian stocks were poised to end their worst week since March. Equity benchmarks from Hong Kong to Sydney extended losses after the S&P 500 Index halted an unprecedented stretch of calm on American equity markets and the CBOE Volatility Index soared 44 percent. South Korea’s stocks and currency dropped and volatility spiked. U.S. President Donald Trump dialed up his warning to North Korea on threats to American allies, lifting gold to a nine-week high and pushing the yen through 109 per dollar, while Treasuries strengthened. Japanese markets are closed for the Mountain Day public holiday.

Escalating tension between the U.S. and North Korea has dominated sentiment in financial markets this week as the spat threatens to boil over into military confrontation. Trump stepped up his campaign of pressure, warning the regime not to follow through with a missile test near Guam and promising massive response to any strike against America or its allies.

Global equities began the week at an all-time high and some notable investment companies have been warning now would be a good time to reduce levels of risk in portfolios. Dalio, who leads the world’s largest hedge fund at Bridgewater Associates, recommends investors consider placing 5 percent to 10 percent of their assets in gold as a hedge against current political and economic risks.

Here are the main moves in markets:


  • Australia’s S&P/ASX 200 Index fell 1.3 percent as of 2:40 p.m. in Sydney. The Hang Seng Index in Hong Kong tumbled 1.9 percent and China’s Shanghai Composite Index was down 1.6 percent.
  • South Korea’s Kospi index lost 1.6 percent and volatility on the Kospi 200 surged as much as 27 percent.
  • Contracts on the S&P 500 Index lost less than 0.1 percent and Nasdaq 100 futures declined 0.3 percent. The S&P 500 declined 1.5 percent on Thursday for its steepest slide since May 17 and the lowest close since July 11.
  • The VIX rose 44 percent to 16.04, it’s highest closing price of Trump’s presidency.


  • The won weakened 0.5 percent against the dollar, set for the worst weekly decline since March.
  • The yen rose 0.2 percent to 108.98, advancing to the strongest in eight weeks.
  • The Bloomberg Dollar Spot Index was little changed after falling 0.1 percent on Thursday.
  • The euro was at $1.1776 after climbing 0.1 percent in the previous session.
  • The Aussie slid 0.4 percent to 78.47 U.S. cents.


  • The yield on 10-year Treasuries declined five basis points to 2.20 percent on Thursday, with trading limited until London opens due to the Japan holiday.
  • Australian 10-year government notes saw yields drop eight basis points to 2.58 percent.


  • West Texas Intermediate crude declined 0.9 percent to $48.15 a barrel in early Friday trading after falling 2 percent Thursday.
  • Gold traded at $1,285.82 an ounce and is up 2.2 percent this week.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Bureau De Change Operators Begs CBN to Approve Electronic Forex Trading




BDCs Seek  CBN Approval Electronic Forex Trading

Bureau de change operators (BDCs) on Wednesday begged the Central Bank of Nigeria to approve the usage of electronic foreign exchange trading to ease demand pressure and facilitate comfort.

Alhaji Aminu Gwadabe, the President of Bureaux De Change Operators of Nigeria (ABCON), made the appeal during a webinar organised by its member with the theme ‘The Impact and Roles of BDCs Challenges and Way Forward.’

Gwadabe urged bureau de change operators to adhere to the rules guiding forex transactions by selling at an appropriate rate stipulated by the CBN.

Gwadabe said: “Technology is a threat whether we like it or not and we have been urging the CBN to allow us operate within the payment space. Our request to the CBN and the federal government is to continue to empower us more especially in the payment space.

“The world is now in the fourth generation and it is no more in the traditional method of doing business even agriculture is digital, so we are appealing to the CBN to allow us be on the digital payment space. As this will deepen the economy, further converge the rate, further deepen liquidity and empower the BDC.

Continuing, Gwadabe said: “Some of us want to be ungodly and trading on parallel market rate is highly unacceptable. The CBN has said it is highly unacceptable, ABCON has said it is highly unacceptable and so we are calling on all the directors of BDCs to please ensure that you don’t sell to willing customers. Any willing customer that says he wants to buy at N465 is not your customer and they would land you sanctions and get penalties.

He added that monies found on operators carrying out illegal trades would be seized by the relevant authorities.

He said: “Any dollar you found trading on the street is going to confiscated and would become federal government’s property. Any dollar you try to courier via border movement at the airport is also government property.”

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Naira to Dollar Exchange Rate in 2020




Naira to dollar exchange rate in 2020 declined by N73 from N306 Central Bank of Nigeria sold it in the beginning of the year to N379 and N386 on the investors and exporters forex window.

The Naira to dollar exchange rate in 2020 has been marred by a series of economic uncertainties and weak macro fundamentals caused by the COVID-19 pandemic.

At the beginning of the year, the official Central Bank of Nigeria’s naira to dollar exchange rate stood at N306 to a US dollar, while on the parallel market popularly known as the black market, the local currency was exchanged between N350 to N360 per US dollar.

On the investors and exporters’ foreign exchange window instituted by the central bank to mirror a free market, the naira was exchanged at N325 to a United State dollar.

However, unclear economic direction amid a 50 percent increase in Value Added Tax from 5 percent to 7.5 percent and border closure hurt the Nigerian economic outlook and plunged investors’ confidence in the economy even before COVID-19 outbreak.

This weak sentiment metamorphosed into broader economic decline when COVID-19 broke out in the country on February 27 2020 as investors that were doubting President Buhari economic path see no reason to wait any longer or believe Nigeria has what it takes, in terms of the health system, to contain an impending health catastrophe.

The surged in demand for US dollar by those looking to move their funds out of the country compelled Governor Godwin Emefiele led central bank to adjust the Nigerian Naira foreign exchange rate from N306 to a US dollar to N360 in order to discourage capital flight while simultaneously sustain dwindling foreign reserves.

But with global oil prices plunging to as low as $15 per barrel, below Nigeria’s $17 per barrel cost of production and demand for the commodity, especially Nigeria’s crude oil at almost zero during the peak of COVID-19, foreign investors were willing to lose N54 per US dollar to exit the Nigerian market.

According to a JPMorgan report, central bank forex backlog was over $5 billion, yet foreign reserves continues to drop. Left with little to no choice, the federal government approached the International Monetary Fund (IMF) for $3.4 billion financial assistance while the apex bank devalued the Naira again to the currency $379 to a US dollar and N386 on the investors and exporters window.

Despite the negative impacts of COVID-19 on the Nigerian people and the broad-based decline in economic activities that saw the nation’s Gross Domestic Product (GDP) contracting by 6.10 percent in the second quarter of the year and the unemployment rising as high as 27.1 percent or 21.8 million people in an import-dependent economy, the apex bank did not just devalue the Naira twice, the Federal Government raised electricity tariffs and remove subsidy in an economy with very weak consumer spending.

With the series of economic uncertainties, investors in forex forward market in London started offering Naira future contracts for N545, saying the apex bank no longer have the resource to support the Naira given the current global situation.

True to their words, Naira to Dollar exchange rate in 2020 plunged to N480 on the black market amid persistent forex scarcity before recently moderating to N467 when the central bank resumed forex sales to the bureau de change operators across the country.

Also, with the economy expected to plunge into an economic recession for the second time in four years in the third quarter of 2020, the Naira to Dollar exchange rate is expected to suffer even further in 2020.

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Naira Drops N2 on Black Market Even With 11.5% Interest Rate




Naira Declines on Black Market Despite Lower Interest Rate

Nigerian Naira traded at N467 to a US dollar on the back market on Wednesday despite the Central Bank of Nigeria’s led monetary policy committee lowering the interest rate by 100 basis points after months of saying NO.

The local currency declined by N2 from N465 it exchanged on Tuesday to N467 on Wednesday as investors doubt the new interest rate would be effective given the size of the nation’s economic woes.

Also, the central bank rate adjustment was seen by most as recession validation. Experts and even the apex bank had predicted that except the nation recorded strong growth in the third quarter, Nigeria would slide into recession for the second time in four years.

This was after Nigerian currency was devalued twice to accommodate the nation’s weak foreign reserves in the wake of low oil prices and the drop in demand for the commodity.

Since then, the central bank has injected a total sum of N3.5 trillion into the economy to mitigate the negative impact of COVID-19 on the nation and support gradual improvement in productivity.

However, the decision of the Federal Government to raise electricity tariffs and remove petrol subsidy at a time when 27.1 percent of the working population or 21.8 million people are out of jobs with COVID-19 eroding consumer buying power, further weighed on sentiment and send the wrong message to potential investors and businesses.

Against, the British pounds the Nigerian Naira traded at N600 while it was exchanged at N545 to a European Union common currency.

With labour declaring a nationwide industrial action starting from Monday September 28, Nigeria’s detoriating economic outlook may further plunge the Naira value against global counterparts.

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