Financial market update

22 June 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: The CBN’s May 18 directive stopping deployment of capital from parent banks to strength or recapitalize their foreign subsidiaries has put banks under pressure to meet up with requirements from the host countries. The CBN has barred local banks from guaranteeing the deposits of their foreign subsidiaries. Additionally, the regulator is requiring banks with foreign subsidiaries to submit, latest by July 14, 2012, plans to ensure that their subsidiaries are fully capitalized, so as to be internationally competitive.

EUROPE: European stocks fell before a report that may show German business confidence declined to its lowest level in two years. U.S. index futures were little changed and Asian shares dropped. The Stoxx Europe 600 Index declined 0.8 percent to 246.38 at 8:03 a.m. in London. Still, the gauge has climbed 0.9 percent this week after Greece’s New Democracy party was able to form a coalition government after placing first in the country’s June 17 election.

INDIA: Indian equities declined for the first time in four days as the rupee dropped to a record, and after reports showed the U.S. economic recovery is slowing. The BSE India Sensitive Index retreated 0.5 percent to 16,950.54 at 10:54 a.m. in Mumbai. India’s rupee touched an all-time low today and is poised for its worst week since September amid concern a slowdown in global economic growth will curb the demand for riskier assets.

CHINA: China’s banking regulator proposed keeping a cap on local government loans to curtail defaults while encouraging funding for railways, roads and affordable homes, a person with direct knowledge of the matter said. China is introducing stimulus measures to arrest a slowdown in the world’s second-biggest economy while enforcing risk controls. Bad debts rose for a second straight quarter for the first time since 2005 and banks’ earnings growth slowed in the three months to March 31, as steps to curb inflation pushed up funding costs and drove down property prices.

Bonds – No change yesterday in market sentiment or direct, still quiet in the bond markets.

Bills – Fairly stable rates up on the long dated maturities in reaction to the increase in the primary rate of the 182day bill.

Money Market – OBB and unsecured O/N rates stable at 14.50% & 15.50%. Liquidity levels still relatively low, market awaits the FAAC inflow to soften rates.

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