- Nigerian Equities Market Will Grow 3.5% in 2017, Say Market Analysts
Despite opening the year with on a negative note, analysts at Meristem Securities Limited (MSL), an investment banking firm, have projected that the Nigerian stock market will close 2017 positively. The stock market has recorded three consecutive yearly fall, closing 2016 with a decline of 6.17, which was lower than what was recorded in 2014 and 2016. As at Friday, the market, measured by the Nigerian Stock Exchange (NSE) All-Share Index (ASI) has posted a negative return of 2.42 per cent.
However, in a special report on the economic and financial outlook titled: “In murky waters…wading through uncertainties,” analysts at MSL have said the NSE ASI will gain 3.49 per cent.
Explaining the performance of the market in 2016, they said in line with the lacklustre state of the economy amid fiscal and monetary policies misalignment, the NSE ASI closed 2016 “below waters” at – 6.17 per cent.
“Market breadth, which measures the number of price gainers relative to price losers in the year, settled at 0.39x, representing 30 gainers and 77 laggards,” they said.
According to them, market sentiments waned under continued pressure from a barrage of negative news flows such as, persistent inflationary pressure, and the paucity of foreign exchange (FX), which consequently led to the further depreciation of naira against major currencies.
This, they added, ultimately culminated to the country sliding into recession.
Speaking on the activities in the equities market in 2017, they said the market is expected to remain largely weak in the first half of 2017, on the back of subsisting macroeconomic uncertainties, while they anticipate a modest recovery towards the tail end of the year. “However, we note that market recovery is partly hinged on stability in the fx market and moderation in exchange rate gap between the interbank and parallel markets. Based on our mix of methodologies, we arrived at a 2017 index level of 27,812, 50, indicating a +3.49 per cent potential market return by December 31, 2017,” they declared.
The Chief Executive Officer of the NSE, Mr. Oscar Onyema had the previous expected optimism that the market will recover this year, disclosing some of the strategies that would be taken by the exchange to market the performance better.
Onyema noted that in the immediate future, the NSE will focus on achieving its goal of becoming a more agile and demutualised exchange and will fast track efforts towards developing innovative products such as exchange traded derivatives to provide investors with tools to better weather economic realities in 2017.
“We intend to strengthen our thought leadership efforts with policymakers to drive policies that will free up the system and promote the ease of doing business in Nigeria. We believe that incentive schemes for sectors of the economy that can support a pivot to export led economy will be beneficial and systematic removal of impediments to doing business and therefore reduction of leakages will attract private sector investments,” Onyema said.
He added that they expect to see a revival of supplementary listings, return of the new issuance market, and potentially one initial public offering (IPO) since the equity market is a forward indicator of the economy.
Barclays Tell High Net Worth Investors to Shun Africa and Other Emerging Economies
Barclays to High Net Worth Clients, Stay Off Africa and Other Emerging Economies
Barclays, one of the world’s largest investment banks, has started advising high net worth clients to stay off Africa and other emerging economies.
According to Barclays, despite the recent recovery noticed in emerging-market stocks, investors are better off avoiding the risks that still abound in emerging nations. Barclays Plc, however, advised high net worth clients to focus on U.S equities despite the S&P’s breakneck rally.
The investment bank said emerging economies do not have enough fiscal buffers to spend their way out of the COVID-19 pandemic and will likely continue to struggle in the near-time compared to the US with 12 percent of gross domestic product fiscal-support.
It said the huge US stimulus may halt rebound in emerging-markets stocks as more money is expected to flow into the world’s largest economy and its European counterparts.
“Compared to the U.S., emerging-market economies appear more vulnerable,” said Haider, the London-based managing director and head of global growth markets. “Their central banks have less room to maneuver, their governments may not be able to provide unlimited support and equity markets, given their sector mix, can be more challenged by an economic slowdown.”
Barclays added that even after 33 percent rebound in stocks of emerging markets since the panic selloff subsided in March, stocks are still down by 9 percent from year-to-date while the US S&P 500 stocks are up by 45 percent. Presently, their stocks trading at a 36 percent discount to US stocks, up from 25 percent three months ago.
Crude Oil Rises to $43.1 Per Barrel on Production Cuts Extension
Crude Oil Hits $43.1 Per Barrel Following OPEC’s Production Cuts Extension
Brent crude oil, against which Nigerian oil price is measured, rose by 1.25 percent on Monday during the Asian trading session following OPEC and allies’ agreement to extend crude oil cuts to the end of July.
OPEC and allies, known as OPEC plus, agreed to extend production cuts of 9.7 million barrels per day reached in April to July on Saturday.
In the virtual conference, delegates agreed that members, including Nigeria and Iraq presently struggling to attain a 100 percent compliance level must keep to the agreement or be forced to do so in subsequent months.
Nigeria, Iraq and others failed to keep to the cartel’s agreement in May after reports show that Nigeria only managed to attain a 19 percent compliance level during the month while Iraq struggled to attain just 38 percent in the same month.
Russia and Saudi Arabia, the two largest producers of the group, warned members to stick to the agreed quota if they want to rebalance the global oil market.
“While the errant producers such as Iraq and Nigeria have vowed to reach 100% conformity and compensate for prior underperformance, we still think they will likely continue to have some commitment issues over the course of the summer,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.
“The potential return of Libyan output could also cause considerable challenges for the OPEC leadership.”
Earlier on Monday, Brent crude oil hits $43.1 per barrel, more than a month record-high, before pulling back slightly to $42.83 per barrel.
Gold Dips by 2 Percent on Better Than Expected Job Report
- Gold Dips by 2 Percent on Better Than Expected Job Report
Gold prices declined by 2 percent on Friday following a better than expected US non-farm payroll report.
The report showed an increase of 2.5 million payroll numbers against a decline of 7.5 million predicted by many experts.
The surprise number boosted investors’ confidence in US recovery as many dumped their haven investment (gold) for the stock market.
“We had significantly stronger-than-expected U.S. payroll numbers – an increase of 2.5 million versus an expectation of a decline of 7.5 million – that 10-million swing has brought forward expectations of the economic recovery in the United States,” said Bart Melek, head of commodity strategies at TD Securities.
Spot gold immediately declined by 1.9 percent per ounce to $1,678.81 while the U.S. gold futures slid 2.6 percent to settle at $1,683.
Gold was also being pressured by stronger yields and a slightly firmer dollar, “meaning the opportunity cost to hold gold in the portfolio has gone up,” Melek added.
The surprise didn’t stop there, US Dow Jones was up 614 points despite the protest going on the US and US-China tension.
Also, NASDAQ rose by 29 points while the S&P index added 50 points increase.
Note: Investors generally increase their investments in gold and other haven assets during a crisis to avert risk exposure and do the opposite once they sense a better economy.
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