Category: Equities

By Taofik Salako, Deputy Group Business Editor

 

Seplat Petroleum Development Company Plc has raised $650 million in debt issue, setting record as the largest bond issue by a company in the Nigerian oil and gas industry.

The senior notes due 2026 were priced at a yield of 7.75 per cent, representing a significant pricing reduction from its $350 million debut issuance in 2018, which priced at a yield of 9.50 per cent , with a coupon of 9.25 per cent.

Transaction report showed that the issue was oversubscribed with demand from 120 global investors from more than 20 countries resulting in a final overbook in excess of $1.1 billion, 1.7 times book coverage.

The report indicated that orders came from high quality institutional investors with long term commitments to Seplat as well as new institutional investors, while the transaction was also well received in the market and traded above par post-pricing.

Read Also: Seplat seeks new capital to settle old debts

 

Seplat noted that the success of the issuance shows confidence by the international market in the Nigerian economy and the oil and gas sector in particular, with a number of the investors committing to the transaction based on the strong gas story of Seplat.

The net proceeds of the new capital raising, according to the company, will be used “to redeem the existing Seplat 2023 notes, repay drawings under the revolving credit facility, for general corporate purposes, and to pay transaction fees and expenses”.

The global coordinators on the transaction were Citi, J.P. Morgan, Standard Bank and Standard Chartered Bank, with Natixis, Rand Merchant Bank and Société Générale acting as joint bookrunners and FCMB Capital Markets, Nedbank, United Bank for Africa and Zenith Bank Plc acting as co-managers.

By Taofik Salako, Deputy Group Business Editor

Shareholders of United Capital Plc on Tuesday approved the payment of N4.2 billion as cash dividend for the 2020 business year.

At the Annual General Meeting (AGM) in Lagos, shareholders considered and approved the financial statements for the 2020 business year, including distribution of N4.2 billion as cash dividends for the year, representing a dividend per share of 70 kobo.

The dividend is payable to shareholders whose names appear on the register of members at the close of business on March 5, 2021.

Key extracts of the audited report and accounts of United Capital for the year ended December 31, 2020 showed that turnover rose by 50 per cent while pre and post tax profits jumped by 61 per cent and 57 per cent respectively.

The report showed that gross earnings rose from N8.59 billion in 2019 to N12.87 billion in 2020. Net operating income grew by 58 per cent from N7.90 billion to N12.49 billion in 2020. Profit before tax leapt from N4.95 billion in 2019 to N7.95 billion in 2020. Profit after tax jumped from N4.97 billion to N7.81 billion. Earnings per share rose correspondingly by 57 per cent from 83 kobo in 2019 to N1.30 in 2020.

The balance sheet also showed considerable improvements with total assets rising by 48 per cent from N150.46 billion in 2019 to N224.75 billion in 2020. Total liabilities grew by 52 per cent to N198.32 billion as against N130.88 billion in previous year. Shareholders’ fund rose by a quarter from N19.59 billion in 2019 to N24.43 billion in 2020.

Shareholders commended the company for its transparency in the published financial statements, and its adherence to legal and ethical requirements as corroborated by the company’s auditors who were also present.

Chairman, United Capital Plc, Mr. Chika Mordi noted that despite the macroeconomic pressure, United Capital reported an outstanding financial performance in 2020.

Group Chief Executive Officer, United Capital Plc, Mr. Peter Ashade said the company’s financial performance, in what was a year of protracted disruptions, was a testament of unwavering commitment to clients’ needs.

“For us at United Capital, we are optimistic about the year 2021 as it presents greater opportunities for innovation, growth, and expansion beyond our current ecosystem,” Ashade said.

He noted that in addition to its outstanding financial performance, United Capital also recorded landmark achievements during the year, including improvement in the company’s corporate ratings from BBB+ to A- with a stable short-term and long-term outlook reflective of an investment grade institution.

According to him, the company’s flagship digital platform, InvestNow, recorded over N1 billion in processed investors assets with its newly commissioned consumer finance business line disbursing 64,536 instant loans valued at N3.14 billion, leveraging a 100 per cent digital model.

He outlined that major contributors to the company’s overall performance were its subsidiary businesses – investment banking, asset management, securities and trustees, which was highlighted in the company’s emergence as top three largest fund manager from 10th position in 2019 with its mutual fund assets under management exceeding N162 billion at the end of 2020 from N39 billion as at year-end 2019.

He pointed out that the company also served as the lead issuing house and trustee on various high-profile public and private securities issuances with a total value exceeding N400 billion in 2020 among others.

By Taofik Salako, Deputy Group Business Editor

Africa’s largest cement producer, Dangote Cement Plc yesterday declared a dividend per share of N16 for the 2020 business year as Nigeria’s most capitalised quoted company paid taxes of about N97 billion to the government.,

Key extracts of the audited results and accounts of Dangote Cement for the year ended December 31, 2020 released yesterday at the Nigerian Stock Exchange (NSE) showed that Dangote Cement’s Nigerian operations during the period sold 15.9Mt for the full year 2020, compared to 14.1Mt in 2019. This included both cement and clinker sales, which implied a 12.9 per cent growth for the full year 2020.

Looking at the domestic sales alone, Nigerian operations sold 15.6Mt, up by 14.3 per cent year on year and resulting in an increase in market share.

Revenue for the Nigerian operations increased by 18 per cent to N720 billion, due to increasing demand in the domestic market. The  growth was enhanced by the innovative national consumer promotion “Bag of Goodies – Season 2” and lower rains in the third quarter compared to the previous year.

The Nigerian business recorded strong earnings before interest, taxes, depreciation and amortisation (EBITDA) of N421.4 indicating a margin of 59 per cent. Dangote Cement posted a record high pan-African EBITDA of N71.3 billion, which went up by 49 per cent. During the year, the cement group commissioned its gas power plant in Tanzania. Group earnings per share was up by 36.9 per cent to N16.14.

The report showed that Dangote Cement recorded strong performance not only at the top line but also at the bottom line, owing to cost saving measures. Despite inflationary pressures and foreign exchange volatility, disciplined cost control measures enabled the company to maintain a relatively flat cash cost per tonne. The cost control measures include improved plant efficiency, better fuel mix and general overhead optimisation

Chief Executive Officer, Dangote Cement Plc, Michel Puchercos said last year was a good for Dangote Cement across board while several landmarks made it a productive year such as the group’s maiden clinker shipment, maiden bond issuance and successful buyback programme.

“We increased our capacity by 3.0 million metric tonnes in Nigeria, commissioned our two export terminals and commissioned our gas power plant in Tanzania. All these were achieved whilst we focused on protecting our people, customers and communities from the impact of the pandemic.

“Dangote Cement recorded strong top-line growth supported by strong cement demand. Profitability was further bolstered by our disciplined cost control measures in what we believed to have been a highly inflationary and volatile year. These measures resulted in a 37.7 per cent increase in profit after tax to N276.1 billion.

“I am delighted to report that Dangote Cement experienced its strongest year in terms of EBITDA and strongest year in terms of volumes. Despite a challenging environment, group volumes for the year were up 8.6 per cent and Group EBITDA was up 20.9 per cent.

“Looking ahead, we have strengthened our alternative fuel initiative which focuses on leveraging the circular economy business model and reducing exposure of our cost base to foreign currencies fluctuations. We continue to embed Dangote Cement’s seven sustainability pillars into every aspect of our operation and culture.

“We remain committed to keeping safe our staff and communities by being fully compliant with health and safety measures in all our territories of operation. We are focused on adapting to the rapidly evolving markets in which we operate,” Puchercos said.

Dangote Cement is sub-Saharan Africa’s largest cement producer with an installed capacity of 45.6Mta across 10 African countries and operates a fully integrated “quarry-to-customer” business with activities covering manufacturing, sales and distribution of cement.

Dangote Cement has a long-term credit rating of AA+ by GCR and Aa2.ng by Moody’s due to its market leading position, significant operational scale and strong financial profile evidenced by the company’s robust operating and net profit margins relative to regional and global peers, adequate working capital, satisfactory cash flow and low leverage.

Dangote Cement is a subsidiary of Dangote Industries Limited, a diversified and fully integrated conglomerate as well as a leading brand across Africa in businesses such as cement, sugar, salt, beverages, and real estate, with new multi-billion dollar projects underway in the oil and gas, petrochemical, fertiliser and agricultural sectors.

By Oluwatomisin Amokeoja

Fintech startup Epos Now has entered Nigeria, which is considered Africa’s largest market in terms of size and opportunities in the financial services sector.

The move, which is considered as part of its wider internationalisation and growth strategy, will see the firm add to its network of venture markets.

Epos Now is a global software and payments technology company, supporting over 35,000 retail and hospitality locations across 71 countries.

Launching its cloud point of sale (POS) solution in Nigeria, the development makes Nigeria the firm’s first entry into the African market.

The move follows a period in which Epos Now enjoyed rapid international growth driven by expansions into Australia Canada, New Zealand, Ireland, Spain and Latin America.

Speaking on its new strategic moves, Epos Now’s VP of Strategic Partnerships EMEA, Ryan Heaphy, said: “Nigeria is one of the fastest-growing markets for point of sale and payments technology, and our products and services are well-placed to meet the demand for advanced, affordable cloud POS solutions.

“With the right partnership in place, we look forward to helping thriving SMBs leverage the latest cloud technology to run their operations more efficiently and reach new customers”.

Polaris Bank has commenced implementation of the Central Bank of Nigeria’s (CBN) ‘Naira 4 Dollar Scheme’ under which recipients receive N5 for every dollar received into domiciliary accounts or as cash over the counter.

Its Managing Director, Mr Innocent Ike said there was growing evidence of a positive relationship between diaspora remittances and growth, adding that the bank will continue to contribute its quota to enhancing economic development in the country.

He explained that the extra cash payment is in line with the CBN’s directive and fully aligns with efforts to encourage the inflow of diaspora remittances into the country.

He described the “CBN Naira 4 Dollar Scheme” as an unprecedented incentive for senders and recipients of international money transfers, noting that the scheme which took effect from March 8, 2021 will run till May 8, 2021.

“We have started paying extra N5 on every dollar to beneficiaries at our branches. This is in addition to the foreign currency they receive from their family and friends abroad,” Ike said.

He said Polaris Bank is committed to delivering  products and services across all sectors.

•Unveils new campaign on how to build lasting wealth

 

Meristem, a leading financial services group, has launched a new corporate campaign to encourage investors and entrepreneurs to partner experienced and trusted financial partners as part of efforts to deepen corporate success and sustainability.

Meristem noted that as the global environment continues to struggle from the effects of the COVID-19 pandemic, it has become imperative for investors to allocate scarce resources smartly and safeguard their investments with organisations who possess the knowledge and investment domain expertise to build lasting wealth.

The new campaign message entitled: ‘Storm’, comes on the heels of the success of the previous campaign, ‘The Journey’, which showcased art doyen, Mrs Nike Okundaye-Davies still anchored on the campaign promise “Let’s take you farther” which made its debut last year.

Group Managing Director, Meristem, Oluwole Abegunde said with ‘Storm’, Meristem seeks to intensify the essence of building lasting wealth that can withstand stormy days noting that while imploring existing and prospective clients to adopt a wide range of its diversified product and service offerings, Meristem is also making bold its ability to partner with people and businesses at any stage of their financial journey.

“The economic and global business environment has been very tough because of the COVID-19 pandemic, many businesses have had a fair share of the accompanying challenges of the pandemic. Investors are now torn on how to allocate scarce resources smartly while pursuing the prospect of healthy financial returns. This can only be possible with the help of tested and trusted partners who have been able to withstand the downsides of the external environment,” Abegunde said.

According to him, from inception, Meristem has operated a client-oriented business which helped it to create tailor-made financial solutions for its clients, some of which include retirement planning, mutual funds, foreign denominated products like meristem dollar investment portfolio, real estate advantage portfolio and more recently, probate management service.

“We will continue to be proactive with product innovation as the investment landscape evolves. This is a signal of our readiness for partnership, to take our clients to their desired financial destination,” Abegunde said.

He pointed out that to showcase its ideals of partnerships, the group partnered with art curator and connoisseur Nike Okundaye-Davies, to drive home the message of resilience and partnership. The choice of Nike Okundaye-Davies seeks to solidify the benefits of resilience and partnership while tapping into the potential of a shared story of growth as depicted in their different life endeavors.

At its core, the campaign elaborates that life’s journey require partners who are resilient, capable and service-oriented to help you get to the desired financial destination.

The ‘Storm’ message highlights a connection between Meristem and Nike Okundaye-Davies and the boldness that have elevated both institutions, with partners who have stayed true to their vision.

Meristem for the past 16 years has been consistent in value creation and innovation within the capital market space. In 2018, the Nigerian Stock Exchange (NSE) awarded Meristem as the best digital broker of the year.

In 2018 also, Meristem became the first Nigerian asset management firm to attain compliance with the Global Investment Performance Standards (GIPS) by the CFA Institute.

By Taofik Salako, Deputy Group Business Editor

Stakeholders in the capital market have reaffirmed their commitments to providing enabling environment that allows all to realise their potential, irrespective of their gender.

As a strategic move to deepen the quality of human capital in the financial market, women have been advised to take a profession in the securities market.

Besides, women are believed to have innate ability to match their male counterparts in any profession and thereby remove the stigma of gender inequality.

Speaking on the Theme: “Promoting gender equality as  a core value in the Nigerian capital market”, at an event to mark International Women Day (IWD) by Chartered Institute of Stockbrokers (CIS), former Director-General, Nigerian Stock Exchange, Prof. Ndi Okereke-Onyuike explained that although stockbroking was dominated by men, more women should aspire to join the profession as they have equal opportunities.

According to her, women have made serious contributions to the growth and development of the capital market by removing the stigma of gender-inequality in many professions. They have achieved this by using their God-given sixth sense.

“The unique theme of this year’s International Women’s Day has opened the floodgate of how we stockbrokers can effectively achieve the core value of equality in the capital market and the whole financial district of Nigeria. The institute should work towards holding a forum to encourage those who have derived wealth from the market to support the millennials who lack the wherewithal to participate in the market,” Mrs Okereke-Onyuike said.

Corroborating her, the first female stockbroker to be inducted and licensed by the Nigerian Stock Exchange, Mrs Elizabeth Ebi explained that she left her comfort zone as an investment banker, broke barrier and opted for the securities market which was largely dominated by men.

“Considering my comfortable and exalted position at the bank and the heavy work load attached to the position, there was no motivation to take on the extra-curricular required to qualify as a stockbroker. However, as I recalled my long drawn out crusade to break the barrier against women becoming stockbrokers I decided to take up the challenge.

“I humbly and dutifully applied myself to the task by not just meeting all the training required but also excelled in the exam recording one of the best results. I was subsequently inducted and licensed as the first female stockbroker on the NSE, together with Chief Nike Adeniran,”  Ebi said.

President, Chartered Institute of Stockbrokers (CIS), Mr Olatunde Amolegbe urged females to embrace the securities market to take advantage of its opportunities.

“I assure you that the Chartered Institute of Stockbrokers is committed to the ideal of gender equality. The capital market is a remarkable exception when it comes to discrimination against women. Our own Prof. (Mrs) Ndi Okereke-Onyuike was a long- serving Director-General of the Nigerian Stock Exchange. The apex regulatory body, the Securities and Exchange Commission (SEC) has had two female Director-Generals till date: Ms Aruma Oteh and Ms Mary Uduk,” Amolegbe said.

A past president of CIS, Mr Mike Itegboje lamented that out of 3000 stockbrokers in Nigeria, only 85 were women.

Itegboje advocated an increased level of enlightenment on the benefits of the capital market across the nation to attract more females.

At the event organised by the Nigerian Stock Exchange (NSE), which also marked the IWD with a bell-ringing ceremony, the NSE reiterated its commitment to gender equality.

Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema said the NSE was committed to playing its part by implementing various initiatives aimed at promoting gender diversity and empowering women.

He said the NSE recognises that there is a pressing need to do more to advance gender equality across the ecosystem noting that one of the NSE’s key initiatives is the three-year Nigeria2Equal programme that  it is implementing in collaboration with the International Finance Corporation (IFC).

According to him, the programme will support the private sector to increase women’s participation as leaders, employees, customers and entrepreneurs through favourable workforce policies and practices, products and services that target the women’s market segment and deliberate measures that promote women’s participation in corporate value chains.

In delivering her goodwill remarks, Chief, Intergovernmental Relations & Africa, United Nations Global Compact (UNGC), Ms. Olajobi Makinwa called on business leaders to choose to challenge the gender disparities that exist within organisations and set clear targets to address gender equality.

According to her, these targets should includes policies that ensure equal pay for work of equal value, address gender bias and prejudice, prevent violence and harassment, offer clear opportunities for career development, and ensure women are included in the decision-making process across all levels of leadership.

Member, National Council, NSE, Erelu Angela Adebayo noted that NSE will continue to celebrate women and create fair and equal opportunities for their growth and career advancement.

“It is imperative that we all consider the challenge ahead of us in achieving a gender equal world and recognise that we have a critical role to play in ensuring we create a post-pandemic future that fully includes and supports women. We must choose to challenge the gender norms and stereotypes and build a more inclusive society that ensures we make steady, collective progress towards empowering all women and girls by 2030 as enshrined by the Sustainable Development Goals (SDGs),” Adebayo said.

The event culminated in the ‘Ring the Bell’ for Gender Equality which was of particular significance to the Exchange given the advancement in the NSE’s demutualisation which suggests that this will be the last International Women’s Day that will be commemorated as the entity called the Nigerian Stock Exchange (NSE). Headlined by the 2nd Vice President, National Council, NSE, Ms. Catherine Nwakaego Echeozo, the bell ringing ceremony honoured the women leaders who currently serve on the National Council of the NSE as well as the newly appointed women leaders who will serve on the Boards of the Nigerian Exchange Group Plc and its subsidiaries.

The virtual event was organised in partnership with the World Federation of Exchanges (WFE), Sustainable Stock Exchange Initiative (SSEI), International Finance Corporation (IFC), United Nations (UN) Women, and the United Nations Global Compact Network Nigeria (GCNN).

Nigerian equities sunk into the red in February with sustained losses in four consecutive weeks eroding early gains and building up losses in most portfolios. Deputy Group Business Editor, Taofik Salako, reports on the near market-wide depreciation and apprehension over the market outlook

 

The bears are on the rampage. Nigerian equities closed weekend with average decline of 6.16 per cent in February 2021, equivalent to net capital depreciation of N1.36 trillion.

From large to mid to small-cap stocks, from financial services to manufacturing, agriculture and engineering, from stocks to ethical stocks, the rampaging bears left the telltales of losses.

With the exception of the oil and gas sector, all sectoral indices at the stock market closed negative, underlining the widespread price depreciation that has shaken the boisterous confidence occasioned by world-ranking returns in 2020 and January 2021.

The All Share Index (ASI)-the value-based common index that tracks all share prices at the Nigerian Stock Exchange (NSE) closed weekend at 39,799.89 points as against February’s opening index of 42,416.66 points.

The ASI-being Nigeria’s largest equities index doubles as Nigeria’s sovereign equity index and serves as a broad measure of the mood at the domestic market and its competitiveness against the global advanced and emerging markets. The decline in February pushed the two-month average year-to-date return for the Nigerian equities market to -1.17 per cent, eroding positive return of 5.32 per cent recorded in January 2021.

 

Negative turn

Aggregate market value of all quoted also dropped correspondingly from February’s opening value of N22.187 trillion to close weekend at N20.823 trillion, representing a loss of N1.36 trillion or 6.15 per cent. The concurrence between the changes in ASI and market capitalisation underscores the fact that the steep decline was almost entirely due to share price depreciation, rather than other corporate changes such as delisting, share reconstruction and merger among others. With the February decline, net capital depreciation for the two-month period stands at N234 billion on straight line deduction or N246.4 billion when adjusted fully alongside the ASI.

The ASI had opened 2021 at 40,270.72 points and rallied to 42,416.66 points in the first month. Aggregate market value of quoted equities, which opened 2021 at N21.057 trillion, had rallied to N22.187 trillion by the end of January 2021.

The decline in February was driven by widespread profit-taking transactions as investors sought to monetise capital gains or realign portfolios away from quoted equities, despite the onset of the earnings season and expectations of dividend declarations. With the exception of the oil and gas sector, which has continued to play the contrarian riding on the back of global oil recovery, all sectoral indices at the NSE closed weekend negative. Most highly capitalised stocks suffered above-average decline during the period, with losses in the influential banking and industrial goods sectors more than three percentage points above the benchmark. The industrial goods sector is the most capitalised sector while banks are the most active and liquid stocks at the Exchange. The NSE Oil and Gas Index posted a positive return of 4.36 per cent in February, extending the sector’s unbeaten run to a two-month average return of 17.33 per cent.

 

Widespread losses

The NSE Industrial Goods Index showed negative average return of -8.80 per cent for February 2021. The NSE Banking Index posted a negative return of -9.73 per cent. The NSE 30 Index-which tracks the 30 largest stocks at the NSE, closed weekend with average return of -7.41 per cent for the month. The NSE Insurance Index recorded the highest decline of 17.82 per cent for the month. The NSE Consumer Goods Index closed weekend with a negative average return of -8.12 per cent for the month. The NSE Pension Index, which tracks stocks specially screened in line with pension funds investment guidelines, closed February with a negative return of -7.68 per cent.  The NSE Lotus Islamic Index, which tracks ethical stocks in compliance with Islamic Shari’ah, declined by 6.12 per cent during the month.

Also, the NSE Main Board Index- which tracks stocks on the main, oldest and largest board at the Exchange, declined by 6.14 per cent.  The NSE Premium Index-which tracks some large-cap stocks with high liquidity and capitalisation, including Dangote Cement, the largest stock at the market, declined by 6.20 per cent in February 2021. The NSE Corporate Governance Index- which mirrors stocks with high corporate governance standards, posted negative return of -7.65 per cent while the NSE Sovereign Bond Index-which tracks national debt issues by the Federal Government of Nigeria, showed a decline of 0.94 per cent within the month.

Further analysis showed that the February slump has also eroded previous gains by most investors, deepening the sense of loss. The NSE Industrial Goods Index now carries a negative two-month average year-to-date return of -7.51 per cent. The NSE Banking Index has so far this year declined by 2.61 per cent. The NSE 30 Index closed weekend with average year-to-date return of -2.84 per cent. The NSE Lotus Islamic Index has declined by 2.79 per cent so far this year. The NSE Consumer Goods Index closed weekend with average year-to-date return of -1.66 per cent. The NSE Pension Index closed with a two-month negative return of -0.77 per cent. The NSE Corporate Governance Index dropped by 1.29 per cent within the two-month period.  The NSE Main Board Index carries a marginal negative return of -0.15 per cent. The NSE Premium Index posted a negative two-month return of -2.33 per cent while the NSE Sovereign Bond Index remained with -0.94 per cent. However, the NSE Insurance Index drew on its substantial gain in January to retain a positive two-month return of 6.64 per cent while the NSE Oil and Gas Index sustained the highest year-to-date return of 17.33 per cent.

 

Cautious optimism

Market analysts said the downtrend at the equities market might not be unconnected with the increasing yields in the fixed-income market. At the last auction for Nigerian Treasury Bills (NTB), stop rates rose by an average of 254 basis points to 3.67 per cent as against 2.33 per cent at the previous auction.

Most analysts are increasingly becoming cautious, balancing expectations of positive sentiment from corporate earnings and dividend recommendations with the possible flight to safety in rising low-risk fixed-income returns.

Analysts at Cowry Asset Management Limited said equities may further trade southwards as investors trade cautiously amid rising fixed income yields. They however expected investors to position in companies which are expected to announce good dividend payments.

Analysts at Cordros Securities said they expected increased flow of corporate earnings in the days ahead as more companies publish their audited full-year results for 2020. Companies quoted on the NSE are expected to submit their audited result not later than 90 days after the end of the relevant business year. Most companies, including all banks and major corporates, use the 12-month Gregorian calendar as their business year. Thus, most companies are expected to submit their audited results, usually accompanied with dividend recommendations, not later than March 31, 2021.

“We believe this (earnings and dividends) should provide respite for market performance. However, we expect intermittent profit-taking activities to continue due to lingering concerns about yield elevation in the fixed-income market.  As a result, we think the local bourse will likely exhibit a zig-zag pattern. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings,” Cordros Securities stated.

Afrinvest Securities said it expected “trading sessions to be a mix of bargain hunting and sustained sell-offs”.

According to analysts at Afrinvest, the direction of yields in the fixed income market would also influence trades especially given the sustained increase in marginal rates at the Open Market Operation (OMO) auction.

 

Global phenomenon

The portfolio shift due to rising fixed-income yield is not limited to the Nigerian or emerging markets alone, investors across the world are showing risk aversion, conscious of the improving yields at the fixed-income market.

Market Analyst, FXTM, Han Tan noted that the massive ascent in yields is prompting investors to cast serious doubt over their exposure to equities, especially for global tech stocks. While global equities indices are declining, Tan pointed out that the rising yields gave reason for the dollar index to keep its head above the 90 psychological level for the time being.

According to Tan, investors were inclined to think of long-running increase in yields and were concerned by about possible tapering by the US Fed. Fed funds futures are already pointing to an interest rate hike that has brought forward to the end of 2022, from 2024.

“With such a debate raging, we can expect to see more volatile days ahead until markets can reach a greater consensus and a firmer understanding over the Fed’s next policy steps, which should in turn offer a new equilibrium for treasury yields,” Tan said.

The calls have mostly been for fixed-income securities. Spot gold was on course to register its sixth monthly loss from the past seven, with rising treasury yields dealing a blow to the non-yielding precious metal. Bullion’s year-to-date losses stand at 7.12 per cent at the time of writing.

“Despite the threat of rising inflation, investors are clearly willing to ditch gold in favour of other assets that can better ride on the economic recovery’s coattails, as well as the subsequent overshoot in prices. Gold ETFs have shed their holdings by more than 2.0 million ounces so far this year,” Tan noted.

 

Cycle of gains and losses

Amid the COVID-19 pandemic and economic recession, Nigerian equities had played the full contrarian to close 2020 with net capital gain of N6.48 trillion. Benchmark indices at the NSE showed average full-year return of 50.03 per cent for the 2020 business year. It was ranked highest in the world. This implied net capital gain of N6.483 trillion. The recent highest return was 42.3 per cent recorded in 2017. The ASI closed 2020 at 40,270.72 points, 50.03 per cent above 26,842.07 points recorded as opening index for the year.

Aggregate market value of all quoted equities at the NSE rose to N21.057 trillion by the end of 2020 as against N12.958 trillion recorded as opening value for the year, an increase of N8.1 trillion. The additional increase in value of market capitalisation, above the ASI percentage change, was due to additional or supplementary listing of shares during the year.

While a steep decline of 18.75 per cent in March 2020 had driven the first quarter to a negative return of -20.7 per cent or net loss of N2.68 trillion, the market recovered in the second quarter with positive average return of 14.12 per cent or net capital gains of N1.656 trillion. It continued its rally with average return of 9.61 per cent or net capital gains of N1.23 trillion in third quarter 2020.

The recovery since 2020 is particularly spectacular when viewed against the background of negative performance in recent years. After posting a world-ranking return of 42.3 per cent in 2017, the market had reversed to negative in 2018 with average full-year return of -17.81 per cent.

In 2019, investors suffered net loss of about N1.71 trillion with negative average return of -14.60 per cent. Prior to 2017, the stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion.

Will earnings and dividend recommendations enliven the market in March? A cocktail of fixed-income yields, dividend yields, earnings performance and global crude oil performance will moderate equities’ return in the weeks ahead. But it appears too early to call the market for the bear.