FX Reforms Leads to Stock Market Bounce
Money Africa
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Good morning and welcome to this week’s edition of 4 Customs Street, our weekly newsletter on the stock market.
The newsletter is divided into two:
Green White Green Last Week
Last week, the All-Share Index (ASI) which monitors the average performance of stocks gained 5.49%. So far this year, the index is up 15.1%. The index measures the average price performance on the exchange.
Some stocks on the NGX-30 index closed at their 52-week high and they are: Okomu Oil Palm Plc (OKOMUOIL), Total Energies Marketing Nigeria Plc (TOTAL), and BUA Foods Plc (BUAFOODS).
This means they closed at the highest point they have been in the last one year.
The NGX-30 index comprises the 30 biggest companies on the exchange by using the criteria of market capitaliaation and liquidity. Market cap is the figure you get when you multiply the current share price of a company by the number of shares it has. Liquidity means how easily an asset can be bought and sold. In this case, stocks.
Why did this happen?
On Tuesday, June 13, 2023, the Nigerian stock market rose to its highest level since July 2008. The rally, which occurred after Nigerian dollar bonds experienced greater gains on Monday, reflected optimism towards the FX unification policy indications made by the recently elected President, Bola Ahmed Tinubu.
The FX reforms could draw back foreign investors who left Nigeria and those who hesitated to invest due to uncertainty about the country's FX policies. This could lead to increased foreign investor involvement in the stock and debt markets, as well as the real sector.
There is an extensive post on what to expect for the FX unification on our LinkedIn page.
Nigerian authorities restore immigration documents of CEO, Roger Brown
Seplat Energy announced on Tuesday, June 13, 2023 that the Ministry of Interior and the Nigeria Immigration Service (NIS) have reinstated the Working Permit, Combined Expatriate Residence Permit and Aliens Card (CERPAC) and other Visas required for entry or stay in Nigeria (immigration documents) for Mr. Roger Brown, the Chief Executive Officer (CEO) of the company.
Previously, the Ministry had withdrawn these immigration documents due to allegations of racism, unfair prejudice, discrimination, and improper immigration status made by workers and stakeholders of Seplat Energy Plc. Mr. Roger Brown resumed his role as CEO of the company on June 13.
The Nigerian student loan bill
President Bola Ahmed Tinubu signed the Students Loan Bill into law with the aim of improving access to higher education for Nigerian students. The bill ensures that students have access to interest-free loans, enabling them to pursue their educational goals without financial constraints.
There is an extensive post on this on our LinkedIn page.
Green White Green This Week
The following companies will be holding their AGM this week: Japaul Gold & Ventures Plc, Trans-Nationwide Express Plc, UAC of Nigeria Plc, Cornerstone Insurance Plc, Chams Holding Company Plc, Notore Chemical Industries Plc, NPF Microfinance Bank Plc, Linkage Assurance Plc, Mutual Benefits Assurance Plc, and Meyer Plc.
AGM stands for Annual General Meeting. It is a mandatory yearly meeting held by companies, organisations, and associations to discuss important matters with their shareholders or members.
The AGM serves as a platform for key stakeholders to receive updates on the company's performance, review financial statements, elect board members or directors, approve the distribution of dividends, and address any other significant issues.
If you held your shares within the qualification period, expect your dividends after the AGMs.
Star-Spangled Banner Last Week
Netflix: Binge-watching to belly-filling
Netflix is launching a special dining experience called Netflix Bites in Los Angeles this month. It's an opportunity for fans of popular Netflix food shows like "Chef's Table" and "Nailed It!" to enjoy an elevated restaurant experience.
Renowned chefs such as Curtis Stone, Rodney Scott, and Nadiya Hussain will collaborate on a unique tasting menu. Mixologists from Netflix's "Drink Masters" show will also create custom cocktails for the drink menu.
The pop-up restaurant opens on June 30. A pop-up restaurant is a temporary dining establishment that opens for a limited period of time in a specific location. Pop-up restaurants are known for their experimental and innovative concepts, offering a distinct dining experience. Reservations require a non-refundable $25 deposit, which will be applied to the final bill. While the menu details are still a secret, reservations are currently available.
France wants Tesla but not Twitter
France is eager to persuade Elon Musk to choose their country as the location for Tesla's upcoming Gigafactory, according to Jean-Noel Barrot, France's digital minister. However, there is also recent tension between France and Musk's Twitter platform, with the minister threatening a potential ban if Twitter fails to comply with upcoming European Union regulations.
France has been actively working to establish itself as a prominent hub for the electric car industry and has already opened its first electric car battery factory this year. Musk is scheduled to speak at a technology conference in Paris, Viva Tech Summit, where the French government will have a strong presence.
As Tesla searches for a new Gigafactory site, France aims to seize the opportunity, joining the company's existing major manufacturing plants in the United States, Germany, and China.
S&P 500 and Nasdaq surge
There has been a series of positive weekly returns in the market over the past few weeks. The market has been experiencing a period of upward momentum and positive performance for an extended duration.
Last week, the S&P 500 went up by 0.3%. The Nasdaq had a bigger increase of 2.5%. The two indexes have been going up for five weeks in a row.
On Friday, the stock market went up because people were hopeful that a deal would be reached to increase the US debt limit.
The PCE price index also rose 0.4% in April, exceeding economists' projections. The Personal Consumption Expenditure (PCE) price index is a measure used by the Federal Reserve to track changes in the prices for goods and services. It helps assess inflation and how it impacts the economy.
Treasury yields went down, which means borrowing costs for the government decreased. This happened because several economic indicators showed that inflation is slowing down, which eased concerns about future interest rate hikes. This positive news also helped push Apple and Microsoft stocks to reach record highs.
All these made investors happy because they saw positive economic data that suggests the US Federal Reserve might soon stop raising interest rates aggressively.
The S&P 500, or Standard & Poor's 500, is a stock market index that represents the performance of 500 large publicly traded companies in the United States. When people talk about the S&P 500 going up or down, they are referring to the overall movement of these 500 companies' stock prices.
Recommended by LinkedIn
NASDAQ, short for the National Association of Securities Dealers Automated Quotations, is a global electronic marketplace for buying and selling stocks (also known as securities) of various companies. It is one of the major stock exchanges in the United States, alongside the New York Stock Exchange (NYSE).
Fed keeps the tempo ateady
The Federal Reserve chose not to raise interest rates for the 11th time in a row during their recent meeting. They want to assess the impact of the previous 10 rate increases before making further decisions.
The Federal Reserve, often called the Fed for short, is responsible for conducting monetary policy, supervising and regulating banks, and maintaining the stability of the financial system. It plays a crucial role in managing the country's economy and has the authority to influence interest rates, control the money supply, and promote overall economic stability.
However, the Federal Open Market Committee indicated that two more rate hikes, each a quarter percentage point, are likely to happen before the end of the year. The Federal Open Market Committee (FOMC) is a branch of the Federal Reserve System, which is the central banking system of the United States. The FOMC is responsible for making important decisions regarding monetary policy in the country.
The Federal Reserve Chair, Jerome Powell, stated that they have already increased the policy interest rate by five percentage points and have been reducing their security holdings quickly. He acknowledged that the full effects of these tightening measures are yet to be fully experienced.
Soros' legacy lives on
George Soros is a billionaire and the founder of Soros Fund Management LLC, a private American investment management firm. He has a net worth of $6.7 billion, according to Forbes, and is one of the top 400 richest people in the world.
He is handing control of his $25 billion empire to his son Alex.
Cava Group's IPO rockets
Cava Group (ticker symbol $CAVA) recently went public, which means it started selling its shares on a stock exchange for the first time. Cava Group, officially known as Cava Mezze Grill, is a restaurant company that specialiaes in Mediterranean cuisine.
The initial public offering (IPO) price was set at $22. An IPO, or initial public offering, is the process by which a privately-owned company offers shares to the public for the first time, allowing investors to buy and trade those shares on a stock exchange.
Now, the indications suggest that when trading begins, the price range for Cava Group's shares will be between $42 and $44. This means that the value of each share has increased significantly from the IPO price.
Investors who bought shares at the IPO price of $22 will potentially see their investment double (2x) in value even before the general public has a chance to buy or sell shares of Cava Group.
Adobe flies high
Adobe released its 2023 second quarter earnings report and these were the results:
Revenue: $4.78 billion expected vs. $4.82 billion reported
Earnings per share: $3.80 expected vs. $3.91 reported
Adobe's stock has soared by a remarkable 40% since May, thanks to investor enthusiasm and the growing interest in AI. During the announcement of the results, Adobe's CEO, Shantanu Narayen, expressed that the company's innovative efforts have positioned it as a leader in the emerging field of generative AI. For example, the AI-powered additions in Adobe Express that give creators access to functionality from Adobe’s flagship creative tools, including Photoshop and Illustrator.
Star-Spangled Banner This Week
The US markets are closed today for the Juneteenth holiday. Juneteenth is a special holiday in the United States celebrated on June 19th. It marks the day when enslaved African Americans were told they were free. On June 19, 1865, a Union general, Gordon Granger, arrived in Texas and declared that all slaves were no longer enslaved.
Also, on Wednesday and Thursday, the Federal Reserve Chair, Jerome Powell, will testify before Congress, as part of his semiannual testimony on monetary policy.
Finally, the earnings season is becoming less busy as the second quarter of the year is coming to an end. However, this week, we expect earnings reports from
Accenture Limited, FedEx Corporation, and Winnebago Industries, Inc. to mention a few.
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