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Economy

Christmas Comes Early for Nigerian ETF Investors

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Christmas Comes Early for Nigerian ETF Investors

Christmas Comes Early for Nigerian ETF Investors

By Quantitative Financial Analytics

The Nigerian stock market has been showing great improvement since the beginning of May 2017 with most of the indices showing double digit returns.

The All-Share Index (ASI) now boasts of a YTD return of 27.02 percent, the NSE pension and Premium index are in an all-time high with returns of 49.65 percent and 35.4 percent respectively.

The Banking index is home with a YTD return of 51.92 percent and the NSE 30 index is smiling with 30.31 percent return, YTD.

It has never been this good, at least, in more recent years. The market rally has been propelled in part by the stability in the Naira exchange rate following the aggressiveness of the Central Bank and by the IMF’s statement that Nigeria is out of recession.

In addition to those, the recently released inflation report adds to the good news as well as Fitch’s “prophesy” on the improving foreign currency liquidity in Nigeria.

All those have combined to add a boost to the market. Believe it or not, the capture of Evans, the kidnap king pin has had its salutary effect on the market as it helps to douse fears about the security situation in Nigeria.

One investment type that has been riding the tide of this market rally is Exchange Traded Funds (ETFs).

Prior to the month of May and in-fact for the greater part of last year, ETF holders were reeling in pain asking what hit them, but that story seems to be changing or has totally changed.

ETF prices rallied upward of 20 percent in the month of May alone wiping off almost all the prior months’ losses and drags.

Quantitative Financial Analytics has revealed that its May performance analysis indicates that the first 6 best performing funds in the month are all ETFs.

Specifically, Vetiva Banking ETF returned 26.41 percent, New Gold ETF, 20 percent, Vetiva Consumer Goods ETF, 17.05 percent while Stanbic IBTC 30 ETF came back with 16.91 percent return.

Vetiva 30 ETF and Stanbic IBTC Pension 40 ETF returned 14.45 and 13.08 percent respectively with Lotus Halal ETF returning 10.3 percent.

This performance has continued in the month of June with most ETFs recording upwards of 15 percent return so far in June.

Surprisingly, a deeper analysis indicates that the ETFs that are more highly correlated to the all share index did slightly worse than those with lower correlation.

This shows that the effect of the rally is more related to sectors of the economy than to the overall market performance.

While the banking sector ETFs with 0.67 correlation performed best, Stanbic IBTC 30 and Vetiva 30 ETF both with a 0.98 correlation did not do as good as the banking ETF.

Compared to safe-haven assets like bonds and treasuries, ETFs seem to be getting some reward for their additional inherent risks.

According to Quantitative Financial Analytics, equity based ETFs are doing far better than the newly introduced Vetiva S&P Sovereign Bond ETF, which is purely a fixed income based ETF.

However, the yield on 10-year Nigeria Treasuries rose by 8bp to 16.15 percent while 20-year yield contracted by 7bp to 16.01 percent in May.

If the good economic news about Nigeria continues, ETF investors may be celebrating Christmas earlier.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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Economy

Naira Tumbles at I&E, P2P, Stable at Parallel Market

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By Adedapo Adesanya

The Naira weakened against the American Dollar at the Peer-to-Peer (P2P) and the Investors and Exporters (I&E) segments of the foreign exchange market (FX) on Monday, February 6, as the country continues to face a cash crunch but maintained stability in the parallel market window.

At the P2P arm of the forex market, the Nigerian currency tumbled against the greenback by N1 yesterday to close at N761/$1 versus the N760/$1 it was sold last Friday.

Also, at the I&E wing of the FX market, the local currency lost 67 Kobo or 0.15 per cent against the US currency to end the first session of the week at N462.17/$1, in contrast to the preceding session’s value of N461.50/$1.

The weakening of the Nigerian Naira happened despite the value of FX transactions going down by $3.00 million or 2.51 per cent to $122.43 million from N119.43 million.

However, in the interbank segment, the Naira appreciated against the Pound Sterling by N12.92 to close at N555.40£1 compared with N568.32/£1 as the Bank of England and the European Central Bank raised interest rates last Thursday and provided guidance suggesting it was nearing the end of its rate hiking cycle.

In the same vein, the domestic currency gained N12.92 N10.82 on the Euro to settle at N496.32/€1 compared with the previous trading session’s value of N507.14/€1.

In the black market, the Naira maintained stability against the United States Dollar, remaining unchanged at N753/$1.

Meanwhile, the crypto space was bearish yesterday as the bullish momentum witnessed last week begin to wear off after last Friday’s stronger-than-expected US non-farm payrolls report, which made investors question the US Federal Reserve’s view that inflation has peaked.

Cardano (ADA) went down by 1.9 per cent to trade at $0.3865, Solana (SOL) depreciated by 1.6 per cent to $23.03, Dogecoin (DOGE) fell by 1.3 per cent to $0.0905, Ripple (XRP) lost 0.8 per cent to trade at $0.3947, Bitcoin (BTC) slid by 0.3 per cent to $22,865.03, and Ethereum (ETH) declined by 0.02 per cent to sell at $1,627.56.

But Litecoin (LTC) went up by 2.8 per cent to $98.69, as Binance Coin (BNB) climbed higher by 0.1 per cent to $326.28, while Binance USD (BUSD) and the US Dollar Tether (USDT) closed flat at $1.00 each.

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Economy

Oil Prices Rise as Earthquakes Hit Turkey, Syria

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oil prices cancel iran deal

By Adedapo Adesanya

Oil prices rose on Monday, buoyed by supply concerns following earthquakes in Turkey and Syria.

Brent crude futures rose 46 cents or 0.6 per cent to $80.40 a barrel, as the United States West Texas Intermediate (WTI) crude futures jumped by 20 cents or 0.3 per cent to $73.59 a barrel.

Massive earthquakes that struck Turkey and Syria on Monday halted operations at Turkey’s major oil export hub in Ceyhan and stopped key crude oil flows from Iraq and Azerbaijan, officials said.

It has been regarded as the worst tremor to strike Turkey this century and was followed in the early afternoon by another large quake of magnitude 7.7.

The Tribeca shipping agency said in a notice that the BTC terminal at Ceyhan that exports Azeri crude oil will be closed through Wednesday pending damage assessments. Azerbaijan uses the Turkish port of Ceyhan as its main crude export hub, with a flow of about 650,000 barrels per day.

According to Reuters, following Monday’s earthquake, Iraq’s Kurdistan Regional Government (KRG) also halted flows through the pipeline it operates that runs from Iraq’s northern Kirkuk fields to Ceyhan, the region’s ministry of natural resources (MNR) said.

The KRG had been pumping 400,000 barrels per day, and Iraq’s federal government was pumping 75,000 barrels per day through the pipeline.

It was also reported that oil exports would resume after a “careful inspection of the pipelines is finalised,” the MNR said in a statement.

Also supporting prices was the prospect for China’s recovery after the relaxation of COVID-19 restrictions continued to drive the value of the commodity.

The International Energy Agency (IEA) expects half of this year’s global oil demand growth to come from China. The agency’s chief, Mr Fatih Birol, disclosed this on Sunday, adding that jet fuel demand was surging.

“If demand goes up very strongly, if the Chinese economy rebounds, then there will be a need, in my view, for the OPEC+ countries to look at their (output) policies,” Mr Birol said, referring to a call of action for the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+.

The 23-man group decided to cut output by 2 million barrels a day from November through 2023 instead of pumping more to cut fuel prices and help the global economy, as the US advised.

Also, price caps on Russian products took effect on Sunday, with Group of Seven (G7) nations, the European Union and Australia agreeing on price limits of $100 a barrel on diesel and other products that trade at a premium to crude and $45 a barrel for products that trade at a discount, such as fuel oil.

The price ceilings, together with an EU ban on Russian oil product imports, are part of a broader agreement among the Group of Seven (G7) countries. It follows a $60 per barrel cap on Russian crude that G7 countries imposed on December 5 as the G7, the EU and Australia seek to limit the country’s ability to fund its war in Ukraine.

Both caps prohibit Western insurance, shipping and other companies from financing, insuring, trading, brokering or carrying cargoes of Russian crude and oil products unless they were bought at or below the set price caps.

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Economy

NGX Upgrades Price Stock Group of Eterna

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price stock group of Eterna

By Dipo Olowookere

The price stock group of Eterna Plc has been moved upward by the Nigerian Exchange (NGX) Limited, Business Post reports.

In a regulatory notice on Monday, the bourse noted that it upgraded the stock category of the energy company from a low-price stock group to a medium-price stock group.

This action, according to the exchange, was necessitated after the stability in the price of the company’s equities within four of the last six months in the new price category, in line with its price methodology framework.

“Equity securities of quoted companies on the exchange (NGX) are classified into three stock price groups or categories; high-priced, medium-priced, and low-priced stocks, based on their market price.

“In this regard, securities must have traded for at least four out of the most recent six-month period within a stock price group’s specified price band to be classified into the category.

“Accordingly, a review of Eternal Plc stock price and trade activities over the most recent six-month period provides the basis for reclassifying the security from the low-priced stock group to the medium-priced stock group.

“This reclassification also necessitates the attendant change in the tick size change from N0.01 kobo to N0.05 kobo, in line with Rule 15.29: Pricing Methodology, Rulebook of the exchange, 2015 (trading license holders’ rules),” the statement from the platform stated.

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