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Nigerian equities in free fall

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The Nigerian equities market has lost N1.766 trillion in 10 months from January to October 2018 and is heading to a negative close contrary to expectations that the gain recorded in 2017 would be sustained this year.

After negative closure in 2014, 2015 and 2016, the market recovered in 2017 with a record gain of 42.3 per cent with projections that the Bull Run would continue through 2018.
However, 10 months after and two months to end of the year, the market has lost N1.766 trillion in capitalisation, which fell from N13.619 trillion in January to close at N11.853 trillion yesterday, translating to 12.9 per cent loss.

The loss is even higher when viewed from the Nigerian Stock Exchange (NSE) All-Share Index (ASI), an angle which has shed 15.1 per cent within the last 10 months. The NSE ASI declined from 38,243.19 to 32,466.27.

Although the market had opened 2018 with an unprecedented bull run that hit a peak at the end of January, the bears set in as from February following the exit of foreign investors to developed markets.

While many of the emerging and frontier markets were affected by the flight to safety by investors due to increase in rates in the United States, Nigerian case was compounded by sell down by some investors to guide against the negative impact of the forthcoming general elections.

However, the decline moderated in the month of October, falling by a marginal 0.9 per cent compared with 5.9 per cent in September. Market analysts said investors’ reaction to third quarter corporate earnings helped to reduce the negative impact in October. But it is believed the market cannot recover in the remaining two months to close the year with a gain, considering the tension being created in the polity as elections approach.

Stockbrokers had said that whereas some investors have remained confident in the strong fundamentals of the market, such confidence has been challenged by developments in the political scene.

Based on the developments, which include defections and utterances capable of heating up the polity, the Association of Stockbroking Houses of Nigeria (ASHON), the umbrella body for the chief executive officers of stockbroking firms, said more investors were exiting the capital market.

 

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Why N606bn was withdrawn from Equities Market

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The Chief Executive Officer of Nigerian Stock Exchange (NSE), Mr Oscar Onyema, yesterday said foreign investors pulled out N605.54 billion from the Nigerian equities market in 2018 because of a shift to higher-yielding assets with lower risks in developed countries, coupled with the perceived political risks in the forthcoming general elections.

The stock market fell by 17.8 per cent in 2018 after recording a growth of 42.3 per cent in 2017.
Giving a recap of the stock market performance in 2018 and outlook for 2019 during a media briefing in Lagos, Onyema said the outflows last year was 50.53 per cent higher than the N402.26 billion repatriated by foreign investors the preceding year.
However, he said most of the foreign investors would still return considering the fact that the Nigerian market has the potential to deliver high returns.

The CEO, who said the market needs foreign investors the way retail domestic investors are needed, assured that the exchange was working on ways to deepening the participation of retail investors in the market going forward. He expressed optimism that the market will bounce back in the second half (H2) of this year.

“Domestically, we believe market sentiments in the first half (H1) of the year will be driven by uncertainty in the oil prices as well as the 2019 general elections. Accordingly, we anticipate volatility in the equities market in H1 in 2019 with enhanced stability post-elections. We believe swift approval and implementation of the 2019 budget may have a positive impact on the companies’ earnings as well as consumer spending. Therefore, we anticipate a return of listings during the year with an uptick in market activity during the H2 of 2019,” he said.
Speaking on the protection of domestic investors, Onyema assured that the exchange would ensure that listed companies stick to listing requirements for the benefits of shareholders.

He said the stock exchange was also working closely with listed companies to assist them to be able to comply with the listing requirements, saying that delisting by some companies should not be a cause of worry.

He said that to enhance the exchange’s listing prospects, “we have strengthened our government engagement efforts on privatisation and listing of state-owned enterprises, and we expect to take advantage of opportunities within this space during the year. We also intend to maintain our collaborative efforts with public and private sector stakeholders to advocate for market-friendly policies, and cater to infrastructure financing needs as well as other capital requirements necessary for sustainable economic growth. The exchange intends to work with the private sector as well, to catalyse the listing of more companies,” Onyema explained.

He disclosed that a search for an alternative asset class opposed to equities led to an increase of 11.7 per cent in the NSE fixed income market capitalisation to N10.17 trillion from N9.10 trillion in 2017.
Turnover, he said, also increased by 22.34 per cent in 2018, compared to 2017.
Onyema added that the NSE’s Exchange Traded Fund(ETF) market witnessed reduced activity on the back of reduced risk appetite in the market.
“The best performing ETF was the Stanbic Pension ETF as it returned 16.37 per cent, indicative of the effect of the recently implemented multi-fund structure for pension fund administrators,” he said.

Looking ahead, Onyema said, the exchange was working on the final stages of the demutualisation process since the bill has been signed into law and assented to by President Muhammadu Buhari.

 

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Emefiele to Unveil 2019 Monetary Policy Direction

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The Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, will next week unfold the Bank’s plans for the 2019 year, during the first Monetary Policy Committee (MPC) meeting scheduled for January 21 to 22.

The Director, Corporate Communications at the CBN, Mr Isaac Okorafor, disclosed this in a statement.

Also, Okorafor confirmed the CBN ’s injection of the sum of $263 million into the Retail Secondary Market Intervention Sales (SMIS), being its first intervention in that sector this year.

This was in addition to the sum CNY 39 million consummated through a combination of spot and short-tenure forwards, arising from bids received from authorised dealers.

The figures obtained from the CBN revealed that the US dollar-denominated interventions were for requests in the agricultural and raw materials sectors while the Yuan sale was for payment of Renminbi-denominated Letters of Credit for agriculture as well as raw materials.

Okorafor said the move was in furtherance of Emefiele’s avowed commitment to ensuring foreign exchange liquidity in the system as well as boosting trade and production.

With the rates closing at N359/$1 last Friday, Okoroafor expressed confidence that the CBN, in the weeks ahead, would sustain its intervention through the sale of foreign exchange to all segments of the market to

meet all legitimate foreign exchange demand in the market while also striving to achieve exchange rate stability in the market.

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Brent crude to rise to $75

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The price of Brent will average  $75 per barrel this year, a new report released at the weekend said.

Brent Crude is a major trading classification of sweet light crude oil that serves as a benchmark price for purchases of oil worldwide. This grade is described as light because of its relatively low density, and sweet because of its low sulphur content.

Analysts at Fitch Solutions Macro Research (FSMR) see the average price of Brent rising to $82 per barrel in 2020, $84 per barrel in 2021 and $85 per barrel in 2022, according to the report, which was sent to Rigzone at the weekend.

Looking at WTI, FSMR analysts forecast that the commodity will average $69 per barrel in 2019, before rising to average $76 per barrel in 2020, $78 per barrel in 2021 and $80 per barrel in 2022.

The report stated: “The commitment by (the Organisation of Petroleum Exporting Countries) OPEC+ to remove 1.2 million barrels per day of supply from the market has failed to revive Brent, although through several heavy price swings firmer floor has been established for the start of 2019.

“As of January 9, prices have rebounded more than 20 per cent from their December lows, off lower United States inventories and shrinking production from Saudi Arabia. Combined with easing U.S.-China trade tensions and continued positive economic numbers from the U.S., this drove Brent to close above $61 per barrel.

“We believe further price appreciation will occur during 2019, although the year will be marked with continued volatility.”

In the report, FSMR analysts said there would be “several key milestone events on the calendar” that have the potential to “drastically shift supply”.

These include the Iranian sanctions waivers expiry in May and the six-month OPEC+ production cuts due to end in June, according to the analysts.

“We expect the focus to be on the effectiveness in reducing excess supply in the market and the outlook for U.S. shale growth in the second half of 2019.

“The main factors we believe that will support higher prices are the winding down of sanction waivers for Iran and continued strong demand growth from emerging markets outside of China,”  the analysts stated in the report.

Oil prices fell about two per cent on Friday amid worries about a global economic slowdown, but futures were set to end the week higher, keeping some gains from a week-long rally spurred by U.S.-China trade hopes.

Brent crude futures fell $1.33, or 2.2 per cent, to $60.35 a barrel; U.S. West Texas Intermediate crude futures were down two per cent, or $1.07, trading at $51.52 a barrel.

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MacKenzie Bezos to become World’s richest woman

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MacKenzie Bezos’s divorce from Amazon.com Inc. founder Jeff Bezos could make her the world’s richest woman. As of now, Francoise Bettencourt Meyers, the granddaughter of the founder of cosmetics manufacturer L’Oreal SA, is the richest woman in the world, with a net worth of $45.6 billion, according to the Bloomberg Billionaires Index.

The announcement by Amazon founder Jeff Bezos, the world’s wealthiest man, and his wife that they will divorce has captivated the imagination — how will they split his giant fortune, estimated at $136 billion?

And what will happen to the Internet retail giant — will his soon-to-be ex get a significant stake, and how would that affect his control of the company?

The former MacKenzie Tuttle knew the 54-year-old Bezos before fame and wealth came calling.

She was by his side for the entire Amazon adventure, from the company’s humble beginnings in his Seattle garage in 1994 to its mammoth success today. They have four children — three sons and an adopted daughter — aged up to their late teens.

As of Wednesday, when the couple formally announced they would divorce after a long separation, the 48-year-old MacKenzie, a novelist, is likely to become the richest woman in the world.

According to celebrity news outlet TMZ, the Bezoses did not have a prenuptial agreement —  which could mean an even split of assets.

They were married in Florida in September 1993, according to documents seen by AFP. But their last place of residence would be the deciding factor in any divorce proceedings.

The couple has numerous residences: in Seattle, where Amazon is based, but also in Washington DC, Texas and Beverly Hills, California.

Bezos, who was once Amazon’s primary stakeholder, now owns about 16 percent of the company — the bulk of his net worth.

At mid-day Thursday, that stake translated to about $130 billion.

Any divorce settlement would include his stock portfolio. If it were split in half, that would leave Bezos — who still runs the company — with an eight per cent stake.

So far, that prospect has not frayed Wall Street, with Amazon shares even up slightly on the Nasdaq on Wednesday after the announcement, only to fall back Thursday.

“Much of his influence in Amazon comes instead from his position within the company as its founder and CEO.”

For Kessler, “if they want to protect the company, they’ll find a way to give her an interest in the company that doesn’t affect the running of the company.”

Of course, the couple may have a post-nuptial deal that will be revealed in the coming months.

They may also end up in an acrimonious divorce, which would surely cloud the prospects of Amazon, both on Wall Street and from a public relations perspective.

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