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FXTM Analysis: Tech Sector Continues to Lead as Central Bankers Influence Currencies

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FXTM Chief Market Strategist Hussein Sayed comments on the tech sector and the Fed’s impact on the Dollar.

Investors fell in love again with tech stocks. The sector which was held responsible for the pullback in equities in the last two weeks is driving indices to record highs. Suddenly valuations are no longer a worrying factor, and Fed tightening is less of a concern. It seems like bargain hunters were waiting for the opportunity to dive in.

Although many market participants considered tech stocks either expensive or bubble-like after the S&P 500 information technology sector soared 22% from the beginning of the year to 9 June, it still doesn’t make sense to compare this rally with the tech bubble burst in 2000. The current leaders in the sector are the FAAMG’s “Apple, Alphabet, Microsoft, Amazon, and Facebook”.

Their aggregate average forward P/E ratio stands at around 23.5, which is less than half the forward P/E for big tech stocks in 2000.

Cash balances are more than six times higher than the levels of 2000 and cash flows are in a much better shape.

Although valuations are not comparable to 2000, they are still high in contrast to previous levels. Given that earnings are expected to continue growing at a rapid pace, the overstretched valuations are justified, and any dip will be seen as an opportunity to buy.

Comments from New York Fed President William Dudley provided the dollar with a boost yesterday. He seemed confident that inflation would return as the jobs market pushes wages higher. More interestingly, he said that he is not paying too much attention to signals of concern from bond markets, which has been flattening for some time.

Fixed income traders were sending negative messages more recently, the most obvious being that they don’t believe the tightening cycle path will continue as expected. Although yields on ten-year bonds moved higher after Dudley’s comments, they are still not signaling high confidence in economic growth.

Thus, economic data in the next couple of weeks should be robust enough to convince bond investors that the economy is on the right track, and for the dollar to continue appreciating. Fed Vice Chair Stanley Fischer is due to speak today. If he shares Dudley’s views, the dollar is likely to continue rallying.

Brexit talks began yesterday. The first day of the negotiations ended calmly with both sides agreeing to focus on Britain’s exit bill and the rights for EU citizens living in the UK and vice versa.

It will probably take some time for negotiations to start influencing the Pound’s direction.

Instead, investors today will focus on what BoE’s Mark Carney has to say after three MPC policymakers voted to raise interest rates last week.

Rising prices and falling wages is one of the biggest challenges a central bank can face, and investors need more clarity on what tools are available to tackle these problems.

 

 


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E-Financial

Lagos State Appoints MoneyMaster as Payment Partner for “Ounje Eko” Programme

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“Ounje Eko”, the food price discount initiative of the Lagos State Government, has appointed leading payment service bank, MoneyMaster Payment Service Bank Limited (MMPSB), as its collaborator in the bid to ensure ease of payments at the market.

MoneyMaster is one of the Central Bank of Nigeria-licensed Payment Service Banks (PSBs) to promote financial inclusion across Nigeria.

Under the partnership, MMPSB will apply its cutting-edge payment solution to engender easy payment and reconciliation in order to make   the experiences of Lagosians who will be getting their food supplies from the markets pleasurable. Its payment solution is also all-encompassing and ensures real time value to payment destinations.

The mobile bank was appointed as the collection and payment partner for “Ounje Eko” Food Markets programme which is a government initiative serving the five divisions of Lagos State. Consequent on this, MoneyMaster Payment Service Bank will collect payments in 57 LCDAs in the state.

The partnership gives credence to the quality of payment solutions that MoneyMaster is reputed for in its services to its growing business clientele in private and public sectors.

 


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CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

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Central Bank of Nigeria (CBN), is investigating irregular foreign exchange transactions and forward contracts valued at approximately $2.4 billion.

CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

The  inquiry follows an extensive audit by Deloitte, which scrutinized $7 billion in dollar debts accumulated under the bank’s previous leadership.

In the aftermath of the 294th Monetary Policy Committee meeting in Abuja, Yemi Cardoso, governor of CBN,  disclosed to journalists that the investigation, supported by the Economic and Financial Crimes Commission, among other security bodies, aims to clarify the legitimacy of these FX allocations identified as problematic by the audit.

“It was determined that a number of these transactions did not qualify…they were outright illegal. The law enforcement agencies are now looking into those transactions that as far as we are concerned, are not valid to be paid,” Cardoso detailed, emphasizing the unlawful nature of these forex deals.

The crux of the investigation lies in the audit findings that a significant portion of the scrutinized transactions lacked proper documentation and, in many instances, were deemed outright illegal.

However, the unfolding investigation has raised concerns within the organized private sector, with some entities contemplating legal action against commercial banks for unresolved forex bids.

Despite these tensions, Governor Cardoso reassures that the foreign exchange market remains open and transparent, inviting stakeholders to address their forex needs through the official channels.

Furthermore, Cardoso clarified the distribution of fertilizers to farmers as a one-off measure and not indicative of a shift back to direct interventions by the CBN, underscoring a commitment to strategic, regulatory governance rather than direct market involvement.

 

 

 

 

 

 

 

 


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CBN Urges Banks to Expedite Action on Recapitalisation

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Central Bank of Nigeria (CBN) has directed deposit money banks in the country to expedite action to increase their capital base from the current ₦25bn.

CBN Urges Banks to Expedite Action on Recapitalisation

Olayemi Cardoso, governor of CBN

Olayemi Cardoso, governor of CBN, stated this during the apex bank’s 294th meeting of the Monetary Policy Committee (MPC) on Tuesday in Abuja, when the MPC hiked the interest rate by 22.75% to 24.75%.

The apex bank chief said the MPC examined developments in the banking sector and expressed satisfaction that the industry remained stable. The committee, however, said to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.

Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.

“The MPC also enjoined the banks to expedite actions on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalised world.”

 

 

 

 


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