ARMF Bond W/H: Create Your Fixed e-Savings Acct(s) At High Interest Rate(s) >7% p.a….dd. 24/1/2020

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CBN has banned on local non-commercial banking investors (like individual & corporate investors) from participation in it’s OMO bills primary & secondary market operations (except for foreign investors & local commercial banks) and limited their access to the FGN Treasury Bills” & Bonds” primary & secondary market operations. Thus, FGN Treasury & Savings Bonds on the NGSE/FMDQ exchanges are the alternative fixed income securities that can give local non-commercial banking investors higher yields than FGN T-bills and also similar yields to those obtained in the CBN OMO-bills market.

N.B: Your fixed savings account on the NGSE is actually Your CSCS Account.

We will try to execute purchase/sales order mandates on FGN treasury bonds & FGN savings bonds at near the last e-o-wk (end of week) market rates as shown below:

Bond                   Tenor (Years)         Current Market Yield (%)       Q’ty In W/H (=N= in MLN)

2020                                 1                                     2.95

2021                                  2                                    7.05                                              50

2022                                   3                                   8.39

2023                                   4                                   9.27

2024                                  5                                    9.66

2025                                  6                                    10.13

2026                                  7                                    10.44

2027                                  8                                    10.75

2028                                  9                                    10.89

2029                                 10                                    10.95

2030                                  11                                   11.02

2034                                 15                                    11.30

2036                                 17                                    11.31

2037                                 18                                    11.43

2049                                 30                                    12.49

N.B: A Typical FGN Savings Bond is a ”revolving” 90-day FGN Treasury Bill.

Standard fixed savings acct opening starts at min. N5,000 where your CSCS acct acts as your e-custodian & e-savings account within the CBN S4 platform. Under the savings product –  Upfront Interest Savings Scheme. which starts at min. savings order of N100,000.00 – only FGN bonds with coupon >7% p.a qualify to be allocated to bond clients.

FAQ:

• What is the effective yield of a FGN bond under the upfront interest savings scheme? – it is calculated by deducting the sum of transaction charges and/or upfront funding expenses from the total yield till maturity (excl. compounding opportunity) and divided by the holding period, for example, purchased at ‘par’ NIGTB 14.2% 14-MAR-2024 (FG112024S1) and held for 5-yrs to maturity => estimated effective yield of 12.6% p.a
• What is the current 91-day FGN T-bill PMA rate ? – 2.95% p.a
• What is the current commercial banks av. savings deposit rate according to CBN ? – 3.93% p.a
• What will be the increment to the bond’s effective rate under the upfront interest savings scheme if the quarterly upfront interest(s) were compounded (re-invested) in 12-month TTM FGN bonds with coupon >7% for example? –  we estimate an increment of 0.583% p.a on the respective FGN bonds’ effective rate. Thus, compounding is an investment strategy that should never be ignored !!!
• Must i have a CSCS trading acct with TRW Stockbrokers Limited to participate? – preferably YES !!!

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ARMF Bond Portfolio has opened a new sub-product called ”collaterized security margin trading” which is accessible only to bond investors under the Upfront Interest Savings Scheme starting from a min. fixed savings of N1MLN @ margin loan rate of 0.0822% per day (pro rata).

Thus, savers can now leverage on their bonds (fixed savings) under the upfront interest savings scheme to obtain fresh cash to invest on the NGSE equity and/or derivative market(s). A N1MLN fixed savings will gain access to an equivalent N1MLN margin loan => N2MLN margin account => leverage ratio (asset/equity) of 200% (2:1).

Margin Loan Window: Open

Marginable Equity Securities: AFRIPRUD, ACCESS, UACN, FLOURMILL, BUACEMENT, UBA

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ARMF Bond portfolio re-opens its sourcing for funds upto N500MLN to be used for the following:

• to finance upfront quarterly interest payments to bond savers under the upfront interest savings scheme;
• to finance collaterized margin loans to bond savers who want to leverage on their bonds (fixed savings) under the upfront interest savings scheme in order to obtain fresh cash to invest on the equity and/or derivative market(s);
• participation starts from min. N50MLN at a ”negotiable” annual fixed interest rate for a 12-month revolving holding period.

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ARMF Bond Portfolio upfront funding & margin loan rate(s) were reduced from 40% p.a to 30% p.a starting 1st January-2020 due to the local falling lending rate environment.
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Caution – selling bonds on the secondary bond market before maturity, can either incur capital loss or capital gain !!!!

Should you require further information on how to get the best (and/or highest) annual interest on Your savings, please contact directly:

Contact Person: Ekwueme Mike Anyadibe

Mobile: 08066564748

E-mail: ekwueme.anyadibe@trw-stockbrokers.com or respartner@live.com

Skype #ID: respartner

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TRW Stockbrokers Limited
Corporate Office: 62/64 Campbell Street (Kajola House)
4th Floor Lagos Island Lagos .
234-1-7646689,234-1-2710224-5
Email: info@trw-stockbrokers.com
website: http://www.trw-stockbrokers.com

Where Is Naija Stock Market Index Going In February-2020?….

22/11/2019

Nov-2019’s target support level @ 25,927.70 pts is still intact as the index forms a bearish impulsive wave since late May-2019 thus we expect the index to continue to fall towards a new target range btw 23,438.91 pts – 25,977.54 pts if resistance @ 27,140.85 pts & 27,983 pts level(s) are not broken in the coming trading days.

The Traders Navigator indicator is also confirming the expected fall as it spots a bearish divergence within a long-term contracting triangle (since Oct-2018) where the next wave (5.4.d) should be bearish thus the probability of a bearish market in the first 2 weeks of Dec-2019 is high.

21/12/2019 (updated dd. 12/1/2020)

21/12/2019 commentary – The new target support level to watch is @ 26,113.90 pts thus the last low in Oct-2019. The index is developing two (2) potential wave paths: a) an ending diagonal or b) a contracting triangle. Notwithstanding, the end wave is bearish with a fall to or below 26,113.90 pts support level in the coming trading weeks.

MACD is also confirming the expected bearish trend as it recently formed a bearish hook thus the probability of a bearish market in Jan-2020 is very high.

12/1/2020 commentary – The index hit a new low @ 26,018.10 pts dd. 24/12/2019 thereby completing the ending diagonal which was confirmed by the extremely bullish rebound that followed.

The Traders Navigator indicator is also confirming the extreme bullish trend as shown in the above diagram…..thus we expect the bullish trend to cover the 1Q2020 till dividend payment period.

25/1/2019

The index is now in a sideways movement with an expectant rally in the 2-H-Feb-2020. Feb-2020 remains bullish within a calm trading month. If MACDH falls below zero level, prepare to take initial profits !!!

We strongly advise investors to watch attentively price movements in Brent Crude Oil Market as this external factor can be a game changer in the 2020 expectations in the Nigerian financial markets.

NGSE WEEKLY STOCK MARKET REPORT FOR JANUARY 24TH 2020

By NGSE,

Weekly Market Report for the Week Ended 24-01-2020

Understanding Emefiele’s Silver Bullet – Sonnie Ayere….

By Sonnie Babatunde Ayere, DLM

In ancient mythology and folklore, silver is seen to have magical powers, used to conquer and combat monsters and used to ultimately overcome challenges faced by Knights and heroes of old.

In Nigeria, one of the monsters that have needed to be faced head-on is a regime of high interest rates and its impending effects on the growth of the country. Most recently, the Central Bank of Nigeria (CBN), led by Governor Godwin Emefiele, decided to take on the challenge of addressing this deterrent to domestic economic growth in Nigeria.

Historically in Nigeria, interest rates have always been high, and this can be directly attributed to the monetary system in vogue since 2009, which sought to use FGN bonds/T-bills and OMO bills as a means of attracting US$ into Nigeria to help stabilize the Naira.

Following this long unnecessary spell of extremely high interest rates in Nigeria from 2009 to 2019, it is gratifying to see that once again, it is possible to experience the rebirth of a sustainable credit economy in Nigeria; one that can support ordinary citizens as well as infrastructure growth.

Yes, many commercial bankers, pension fund managers, asset managers, and traditional buy-side investors do not like these lower rates. Some use old archaic economic theories that question how inflation (at 11%) can be higher than the treasury risk-free rate (at 3%). Even when you look at inflation against yields on fixed income securities, it would be inflationary expectations that an economist will analyze and not the spot inflation per se.

Why so?

If I were to purchase a 10year bond, with a coupon rate of 10% and spot inflation is 11% today, you could argue that you are getting a negative return today. However, this would only be for the first year as inflation the next year could be 9% or could even have dropped to 7% in year 5 and so on. Therefore, over the duration of the bond, my coupon rate begins to exceed future spot inflation rates as described above and therefore I’m in the money (bond price in premium).

If, however, I did not buy that bond and inflation falls as described above, the new bonds will have increasingly lower coupons and my profit as an investor becomes much less. Who also says that the short-term risk-free rate (T-Bills) must be above inflation? Where an investor wants above inflation returns, then such investor takes the appropriate risk/reward opportunities. That is what all other institutional investors, worldwide do.

Why the clamour for low interest rates?

The answer is simple. No economy can expect sustainable real growth when long term rates are above single digit. In order to attack inflation in Nigeria, we need to combat the high cost of the factors of production i.e. power, infrastructure (hard & soft), logistics, transportation, and a host of others. Long-term funding therefore becomes critical, most importantly the cost of financing at the risk-free rates that make our commercial banks, pension funds, etc. happy. Financing these critical components of economic development for the country become utterly impossible, leaving us in the rot we have become accustomed to. However, with Emefiele’s silver bullet, projects that will reduce the cost of production in Nigeria and enable us morph into a country that can produce competitively rather than continuously import, begins to actualize.

Why do we call it a silver bullet?

The lower interest rates you see today is a matter of basic economic supply & demand, induced by removing domestic investors from CBN’s Open Market Operations (OMO). Henceforth, domestic investors have been directed by the CBN to buy domestic securities issued by the Federal Republic of Nigeria, namely Treasury Bills and FGN Bonds. The result is that the demand for treasury bills and FGN bonds now far exceeds its supply and as such the yields have been adjusted to their normal economic equilibrium, dictated by investor appetite. OMO securities are now the preserve of a bilateral financing agreement between the CBN and foreign portfolio investors.

In other words, Foreign Portfolio Investors (FPIs) will be willing to buy Nigerian OMO bills at a negotiated yield that does not distort the Nigerian domestic yield curve, fostering a credit market in the country and allowing Nigeria fund its infrastructure with long term economically viable Naira. I recently read an article from an international rating agency criticizing this move by the CBN, sighting illiquidity in the OMO securities due to a much smaller investor base. If a window was opened to foreign investors to sell to the CBN whenever necessary, then this totally makes the bills liquid and defeats that theory from the rating agency.

With regards to the fear of a Naira devaluation, again this is an inaccurate conclusion. To the extent that the negotiable rates between the CBN and FPIs remain attractive, the probability of a run on the Naira remains mute. This coupled with the Import & Export FX window and CBN’s timely interventions, we can look forward to having a relatively stable currency and low economically viable interest rates that will help grow the economy into a stronger future.

So, should we like Emefiele’s silver bullet?

This answer is a resounding yes. Nigerians lets support this crucial initiative from the CBN for a brighter tomorrow and let’s help ourselves breakout from our history of round tripping banking. Congratulations to Governor Godwin Emefiele and his team at the CBN for a job well done.

NSE pricelist for Jan 24, 2020

TRW_STOCKBROKERS_stxpricemove_d_all-2020-01-24 14_39_01.481

FBNQuest 2020 Research Outlook: Global Headwinds Moderating, Domestic Calm….

By FBNQuest Research,

The global picture to the fore:
We welcome the pause in easing by the Federal Reserve: more cuts would have signaled that global headwinds required a response and/or that the world’s largest economy was in difficulties. Neither would help Nigeria or EMs generally. We also welcome the resilience of the oil price, underpinned as ever by geopolitics. Any further rapprochement between the US and China over their trade dispute would be supportive of demand.

Another year of unexciting growth ahead:
We see growth inching forward in the direction of 3.0%, based upon a small fiscal stimulus, a modest rise in oil output, selective private investment and, finally, an increase in credit extension. The rebuilding of household wallets is slow work-in-progress despite the settlement of some salary and other arrears. At some point, the introduction of the approved new minimum wage will also provide a boost. Some substantive reforms by the FGN alongside its success with the 2020 budget would help.

The first budget test passed, more to follow:
Having pushed the budget through with great speed, the challenge for the FGN is to boost revenue collection and capital expenditure.

The fx regime to survive some turbulence:
The leading macro story is the solidity of the fx regime in the face of reserves depletion and the exit of some foreign portfolio investors (FPIs). We think that the authorities will be able to hold the line although their task would be easier if the FGN was to return to the Eurobond market.

Correction in debt market, potential 19% return for equities:
We doubt that the surge in FGN naira debt markets is sustainable and see a little retracement this year of up to 100bps for mid-curve bonds. Although fundamentals are still challenged, asset rotation by domestic institutions is helping the equities market. We forecast a year-end close of 35,000 for the All Share Index (ASI), +30% from end-Dec 2019, +19% from current levels.

13059-FBNQuest Capital Nigeria Outlook 2020-proshare

Stock Watch: Access Bank Plc…

2/11/2019

Access Bank hit a top @ N8.20 dd. 27/9/2019 and since then has been in a corrective trend thereby developing an expanded flat pattern which seems to be attempting to break above the recent top.

Caution!….it’s trader navigator indicator remains in a ‘sell’ signal…thus it may be more reasonable to wait for Access to break over N8.20 before taking any investment action(s). For this reason, our preferred expectation is for Access to continue it’s initial bearish trend since Oct-2019 towards a support level @ N6.65

In the coming trading days, we recommend ”buy the dip” on Access Bank Plc.

16/11/2019

Access Bank may have hit a top @ N10.50 and with it’s fair price around N8.49, it looks overbought. The stock seems to have formed an ending diagonal pattern with a massive bullish thrust-out but take note that it’s Traders Navigator indicator still remains in a ”sell” mode notwithstanding the massive surge in price from N7.07 to N10.50 in the last 3 weeks.

Thus, what could make Access fall again to N5.00 support level? Maybe it is time for the new “Access/Diamond” management to execute its N75bln capital increase thus creating the potential ”price dilution” event.

In the coming trading days, we recommend ”bearish caution’‘ on Access Bank Plc.

23/1/2020

Access Bank topped recently @ N12.00 and has entered into a corrective (bearish) trend where it touched perfectly the lower limit of our long-term bullish trend channel. The question is – can it break below this limit?

May be ‘YES’ as a bearish hook is forming on the weekly MACD. This may be the initial sell-off confirmation….if you add the early Jan-2020’s Access shares sell-off by Mr. Wigwe (CEO/M.D of Access Bank Plc) then it seems technicals are confirming the insider trading activities in Access.

Notwithstanding, if the correction is firm – we estimate that our target support range will be between N7.00 – N9.00 thus maybe it is time for the new “Access/Diamond” entity to execute its N75bln capital increase thus ensuring the long expected ”price dilution” event.