GTI TOP 5 STOCK PICKS FOR THE WEEK COMENCING 30/11/2015

Julius Berger returns to the top spot on the top 5 this week. The focus on infrastructure in Nigeria to help jump start the economy in 2016 is a major incentive for stocking up on the shares of Julius Berger. We expect  increased business activities in the construction sector in 2016 and we expect that this will translate to a boost in the company’s income.

UBA claims the second spot on the table this week. This is yet another company making its debut on our top 5. The bank has shown some consistency since the beginning of this year. We were particularly concerned about the bank’s capital adequacy in the past, but are impressed by the progressive growth in the bank’s shareholders fund since the beginning of the year

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https://drive.google.com/file/d/0B7bfqve2E3QrdmY2eVA0dXMwQUE/view?usp=sharing

IMF APPROVES RESERVE-CURRENCY STATUS FOR CHINA'S YUAN

The IMF will add the yuan to its basket of reserve currencies, an international stamp of approval of the progress China has made integrating into a global economic system dominated for decades by the U.S., Europe and Japan.

The International Monetary Fund’s executive board, which represents the fund’s 188 member nations, decided the yuan meets the standard of being “freely usable” and will join the dollar, euro, pound and yen in its Special Drawing Rights basket, the organization said Monday in a statement. Approval was expected after IMF Managing Director Christine Lagarde announced Nov. 13 that her staff recommended inclusion, a position she supported.

WORLD BIGGEST PENSION FUND LOSES $64 BILLION AMID EQUITY ROUT

The world’s biggest pension fund posted its worst quarterly loss since at least 2008 after a global stock rout in August and September wiped $64 billion off the Japanese asset manager’s investments.

The 135.1 trillion yen ($1.1 trillion) Government Pension Investment Fund lost 5.6 percent last quarter as the value of its holdings declined by 7.9 trillion yen, according to documents released Monday in Tokyo. That’s the biggest percentage drop in comparable data starting from April 2008. The fund lost 8 trillion yen on its domestic and foreign equities and 241 billion yen on overseas debt, while Japanese bonds handed GPIF a 302 billion yen gain.

OIL'S BIG PLAYERS LINE UP FOR $30 BILLION OF PROJECTS IN IRAN

Total SA, Royal Dutch Shell Plc and Lukoil PJSC are among international companies that have selected oil and natural gas deposits to develop in Iran as the holder of the world’s fourth-largest crude reserves presents $30 billion worth of projects to investors.

Total is one of the companies that have been in the forefront of discussions and Eni SpA is also looking to invest, Oil Minister Bijan Namdar Zanganeh said. Shell, Total and Lukoil all specified fields they would be interested in developing in Iran, Ali Kardor, deputy director of investment and financing at National Iranian Oil Co. said in an interview in Tehran.

Bijan Namdar Zanganeh

 

Photographer: Atta Kenare/AFP/Getty Images

“Many companies are interested. Europeans are interested, Asian companies are interested,” Zanganeh told reporters at a conference in Tehran on Saturday. “Total is interested, Eni is interested.”

GOLD FALLS TO LOWEST SINCE 2010 AS RISING DOLLAR CURBS DEMAND

Gold fell to the lowest in five years as speculation that U.S. policy makers will raise interest rates next month helped boost the dollar, curbing the metal’s appeal as an alternative asset.

The greenback climbed as much as 0.3 percent against a basket of 10 currencies on Friday to near the highest since at least 2004. Odds that the Federal Reserve will increase rates next month for the first time since 2006 advanced to 74 percent on Friday, from 35 percent a month ago, Fed-fund futures data show.

Bets on higher rates have risen as a resilient U.S. labor market powers consumer spending, adding to signs that the economy may be robust enough to withstand higher rates. Tighter monetary policy reduces the allure of gold because it doesn’t pay interest, unlike competing investments. Assets in exchange-traded products backed by the metal have fallen to the lowest since 2009, while hedge funds are holding a net-short position.

INVESTING IN RUSSIA OR TURKEY?, WINNER SAYS IGNORE DOWNED JET

Marko Daljajev says he’s made money on Turkish and Russian stocks by ignoring the big international events that make headlines.

That’s good advice now, when tensions between the two countries are sizzling after Turkey this week shot down a Russian fighter jet. Daljajev runs the SEB Eastern Europe Small Cap Fund, which is the best performer this year out of the 100 with sizable holdings in both countries.

Over the past 12 months Turkey has experienced a hung parliament, record lira weakness, terrorism and a flood of Syrian refugees. Russia’s been in recession, crippled by the plunge in world oil prices. Even so, Daljajev’s euro-denominated fund is up 17 percent, while the MSCI Eastern European benchmark is down by 5 percent.

BUHARI BOUNCE BECOMES BUST AS NIGERIA POLICIES IRK INVESTORS

When Muhammadu Buhari clinched victory in Nigeria’s presidential elections in March, stocks soared as investors looked to the former military ruler to reverse decades of economic mismanagement and policy inertia. Now hopes have fizzled in his ability to turn around Africa’s largest economy and oil producer.

Money that flowed into stocks and bonds in the West African nation, which McKinsey & Co. says could become one of the world’s 20 biggest economies by 2030, is now fleeing as growth prospects diminish along with oil prices. While Buhari, 72, has prioritized stamping out the graft that has plagued Nigeria since independence from Britain in 1960, policy-making appears as uncertain and haphazard as ever.

BARCLAYS FINED $109 MILLION FOR RISK FAILINGS ON 'ELEPHANT DEAL'

Barclays Plc was fined 72.1 million pounds ($109 million) by U.K. regulators for failing to fully probe a group of “politically exposed” ultra-high-net-worth clients tied to a transaction of 1.9 billion pounds.

The lender executed the so-called elephant deal in 2011 and 2012 for a number of clients, the Financial Conduct Authority said in a statement on Thursday. While the individuals should have been “subject to enhanced levels of due diligence and monitoring,” Barclays didn’t follow standard procedures, “preferring instead to take on the clients as quickly as possible” and generating 52.3 million pounds in revenue, the FCA said, without disclosing the customers’ identity.

SAUDI ARABIA'S NET FOREIGN ASSETS SLIDE TO THREE-YEAR LOW

Saudi Arabia’s net foreign assets dropped to $640 billion in October, the lowest level in three years as the oil rout strains government finances in the biggest Arab economy.

Net foreign assets held by the Saudi Arabian Monetary Agency fell 1 percent in October, according to central bank data released Thursday. The reserves have plunged more than $95 billion since peaking at an all-time high of $737 billion in August 2014.

The economy of the world’s largest oil exporter is coming under pressure after oil prices tumbled more than 40 percent over the past year, pushing authorities to search for savings and sell bonds for the first time since 2007. The International Monetary Fund predicts a budget deficit exceeding 20 percent of economic output this year, and says at that rate Saudi savings would run out after five years.

“The key challenges are our over-dependence on oil and the way we prepare and spend our budgets,” Deputy Crown Prince Mohammed bin Salman told The New York Times in an interview published on Wednesday. The government is planning reforms including subsidy cuts, the privatization and taxation of mines and a turn to nuclear and solar power to reduce domestic oil consumption, he said.

source: Bloomberg

WHY THE MPC DECIDED TO REDUCE INTEREST RATE BY KOREDE OLOGUN

“Now that policy rate is presumably below the neutral interest rate to buttress Nigeria’s stance on expanding the economy, there is no room for an insensible fiscal interaction”. The Central Bank of Nigeria (CBN) reversed the trend of interest rate hikes on the 24th of November, 2015 in its last Monetary Policy Committee (MPC) meeting for the year in an effort to soften grounds for an expansionary drive. The interest rate was reduced sporadically during and after the 2008 financial crisis to absorb market disruptions caused by the crisis until the end of 2011 where it was maintained at 12% for about 23 months. The benchmark interest rate was increased to 13% in 2014 while inflation crept up well above the apex bank’s target. 

The decision to reduce interest rate by 200 basis points to 11% was partly informed by the assertion that the CBN has been involved in unconventional form of monetary policy in an effort to promote increased lending and liquidity. The CBN intervention has properly focused on money rate of interest using control over bank reserves as leverage to influence the pace of lending after the Treasury Single Account (TSA) that drained some liquidity from the economy. Cash Reserve Ratio for banks was reduced from 25% to 20% in a model that monitors injection of unlocked money into the economy. Expectations are in favour of the Federal Government using its power to promote maximum employment, production and purchasing power as a new political consensus. It is expected to experience a difficult and frustrating market when major policy decisions are made, a relief is that hard markets are typically followed by easier markets. 

The CBN has opened a lot of “what if doors” in the economy caused by a major shift in interest rate policy. It won’t be totally wrong to say that government’s efforts are progressing towards completely deemphasizing dependency on oil in the long term. Going forward, the struggle will be to restore discipline into an economy with excess money in supply and a demand pull inflation in the long term. On the other hand, liquidity trap could render the monetary policy ineffective in an economy that looks to benefit from potential rise in interest rates. The effectiveness of this new policy will thrive on the willingness of banks to lend greater amounts, flexibility of short term rates (below zero short term rates) and the credibility of the monetary authority.

POST MPC REVIEW REPORT

Our Overview…

The MPC’s contraction of the key bench-mark rate from 13% to 11% as well as the reduction of the CRR to 20% from 25% was largely unexpected at this time. Our expectation was that the committee would maintain status quo and allow the impact of the previous policy decision to permeate more into the system, especially with the moderation in October’s inflation figure to 9.3% from 9.4% in September    (after 10 consistent month on month uptick).

The CBN highlighted that the impetus to ease the key bench mark rate and unlock liquidity into the system in order to jump start the economy and channel liquidity into the real sector was gotten from the positive October inflation figure as well as the upswing in GDP growth rate after a long progressive decline as a result of the steep crash in oil prices.

In our analysis of the MPC decision, we have decided to evaluate the positive implication of the MPC’s decision on Macroeconomic indicators and the equities market as well the pressure points of the policy on the economy.

MPC Decision, the pro’s…

The proposed expansionary budget of the Federal Government of N8triillion (over 80% rise from the 2015 budget)  and  about 40% proposed for capital expenditure, is a clear indication that the new government is focused on economic growth (which in any case is an imperative considering that our bread and butter income head has experienced + 50% price tank).

   

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OIL ADVANCE AS SAUDI ARABIA REITERATES MARKET STABILITY PLEDGE

Oil gained amid a reiteration by Saudi Arabia that the world’s biggest exporter is committed to working with OPEC members and other producers to stabilize the crude market.

Futures rose as much as 1.2 percent in New York. Saudi Arabia strives to “cooperate with all oil producers and exporters, from inside and outside of OPEC, to preserve the stability of the market and prices,” the nation’s cabinet said in a statement Monday. U.S. crude stockpiles probably rose for a ninth week through Nov. 20, according to a Bloomberg survey before Energy Information Administration data Wednesday.