Bulls n Bears Daily Market Commentary : 01 June 2018

Fri Jun 1 15:36:52 CAT 2018

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Bulls n Bears Daily Market Commentary : 01 June 2018

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Zimbabwe Stock Exchange Update

Market Turnover $3,525,289.91 with foreign buys at $621.00 and foreign sales
were $322,195.55. Total trades were 107.

The All Share index closed the week on a higher note after putting a strong
1.69 points   to close at 109.99 points. Beverage giant DELTA  went up by
$0.0600 to trade at $2.1300, ECONET gained $0.0512 to close at $1.0000 and
INNSCOR was $0.0200 firmer at $1.3200. Other gains were in DAIRIBORD  which
added $0.0108 to settle at $0.1558 and MEIKLES   increased by $0.0097 to
$0.3697.

Two counters lost ground; OK ZIMBABWE  shed $0.0100 to close at $0.2100 and
TURNALL dropped $0.0010 to settle at $0.0095.

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Global Currencies & Equity Markets

Kenyan, Zambian currencies to make gains, Uganda's to weaken

(Reuters) - The Kenyan shilling and Zambia’s kwacha are set to make gains
against the dollar, while the currencies of Tanzania and Ghana are forecast
to remain stable.

KENYA

The Kenyan shilling is expected to strengthen in the coming week due to
decreased demand for dollars from routine buyers, traders said.

Commercial banks quoted the shilling at 101.30/50 per dollar on Thursday,
from a close of 101.00/20 a week ago.

TANZANIA

The Tanzanian shilling is expected to trade in a tight range in the coming
week due to a balance between demand for dollars and supply in the market,
traders said.

Commercial banks quoted the shilling at 2,276/2,286 to the dollar on
Thursday, compared with 2,282/2,287 a week ago.

GHANA

Ghana’s cedi is seen stable within its current range, with dollar inflows
matching demand by local businesses, analysts said.

The local unit, which was fairly stable in the first quarter, came under
pressure this month, touching 4.7 to the dollar by mid-morning on Thursday,
from 4.64 a week ago and down around 3 percent since January.

UGANDA

The Uganda shilling may weaken past a psychological level of 3,800 over the
next one week, if the central bank does not intervene to soak up soaring
demand for dollars from manufacturing and energy importers.

At 1125 GMT, commercial banks quoted the shilling at 3,770/3,780, weaker
than last Thursday’s close of 3,735/3,745. The shilling has been posting
losses over the last few days.

ZAMBIA

The kwacha is likely to hold on to its gains next week as exporters sell
dollars in anticipation of further appreciation by the local currency.

On Thursday, commercial banks quoted the currency of Africa’s No.2 copper
producer at 10.3100 per dollar from a close of 10.3700 a week earlier. “In
the week ahead, we could also see some panic selling of dollars for fear of
being left behind, which will give the local unit some much-needed support,”
the local branch of South Africa’s First National Bank (FNB) said in a note.

America

USD bounces in Asia, UK manufacturing PMI, US payrolls eyed

Forex today was a quiet affair in Asia, as markets remained unnerved amid
ongoing Italian and Spanish political tensions and renewed jitters over
global trade war after the US imposed metal tariffs on Canada, Mexico and
the European Union (EU). The US dollar picked up bids versus its main
competitors and staged a solid comeback, sending the USD index back above
the 94 handle.

Broad-based US dollar comeback sent most majors into the red zone, with the
Aussie having emerged the weakest, despite a positive surprise delivered by
the Chinese Caixin manufacturing PMI data. Meanwhile, the USD/JPY pair
regained ground above the 109 handle, as the Yen failed to benefit from the
reduction in JGB purchases announced by the Bank of Japan (BoJ) earlier
today.  

Amongst the related markets, the Asian equity markets traded mostly lower
heading into the key US employment data while both oil and gold prices
traded on the back foot, as markets digest the latest trade war news.

Main topics in Asia

UK's David Davis developing border solution for Ireland

As reported by the Sun, the UK's David Davis is developing a Brexit solution
that would see the Ireland border debate resolved and put an end to the
stalemate surrounding Brexit preparations.

Trump plays down odds of quick success with North Korea - Reuters

As reported by Reuters, US President Donald Trump downplayed the chances of
reaching a quick resolution with North Korea in the upcoming off-and-on
meeting between Trump and North Korea's Kim Jong Un.

BOJ cuts purchases of JGBs maturing in 5-10 years

The news is crossing wires vi Reuters that Bank of Japan (BOJ) has reduced
the purchases of Japanese Government Bond (JGBs) maturing in 5-10 years to
JPY 430 billion from the previous JPY 450 billion.

BOJ's Kuroda: Fed policy normalization is a good thing for global economy

The comments from Bank of Japan (BOJ) governor Kuroda are crossing the wires
via Reuters.

China's Caixin Manufacturing PMI steadies at 51.1 in May, surprises
positively

China's May Caixin manufacturing PMI came in at 51.1 vs. 51.0 expected and
51.1 last, with the production and total new orders both modestly higher. 

Germany’s Scholz: European Union would react "strongly and wisely" to US
tariffs

Reuters is out with the latest comments from the German Finance Minister
Scholz, as he responds to the US metal tariffs imposed on Canada, European
Union (EU) and Mexico from G7 meeting.

Key Focus ahead

Today’s EUR calendar sees a raft of final manufacturing PMI reports from
across the Euro area economies while the UK manufacturing PMI reading will
be the main focus, dropping in at 0830 GMT.

Moving on, the crucial US labor market report will be published at 1230 GMT,
with all eyes on the average hourly earnings for a fresh take on the US
inflation and interest rates outlooks. Also, of note remains the Canadian
manufacturing PMI, followed by the US ISM manufacturing PMI report among
other minority reports.

Meanwhile, the Baker Hughes Rig Counts could offer fresh trading impetus to
the oil and Loonie traders, as G7 meeting will go on all through the day.
Besides, the latest concerns about the increased prospects of a global trade
war and Italian politics will remain a key driver across the fx board.
Further, the Spanish PM Rajoy’s no-confidence vote will be closely eyed,
with markets expecting Rajoy to fail in a no-confidence motion. 

Rajoy’s departure would trigger a second political crisis in southern
Europe, further unnerving financial markets already shaken by the failed
attempts to form a government in Italy.

EUR/USD: On the defensive despite the corrective rally, focus on US wage
growth numbers

The common currency is not out of the woods yet, despite the 200-pip rally
from the weekly low of 1.1510. A better-than-expected US non-farm payrolls
and wage growth data would bolster the already bearish technical setup seen
in the monthly chart and could derail the corrective rally. 

GBP/USD slips away from 1.33 as markets recoil on trade war rhetoric

With market sentiment souring, the Sterling heads into Friday with only
Markit Manufacturing PMIs for May (forecast 53.5, prev. 53.9) on the docket
at 08:30 GMT, Followed by the US NFP report at 12:30 GMT. 

Spain PM Mariano Rajoy faces defeat in Friday no-confidence vote - BBC

Spain's Prime Minister Mariano Rajoy could be forced out of office as the
Basque Nationalist Party (PNV), which holds a crucial five seats in
parliament, has announced its support to the no-confidence vote, according
to BBC. 

Nonfarm Payroll preview: volatility coming, but no lasting effect expected

The relevance of employment figures is tithed to upcoming central banks'
decisions, not only in America. The other leg, is, of course, inflation.
With that in mind, one should wonder how much influence the outcome of the
report could have on Fed's future decisions.

Commodities Markets

Zimbabwe removes requirement for foreign mines to list locally

(Reuters) - Zimbabwe’s parliament has passed amendments to the mining bill
after removing clauses that required foreign mining companies to list
locally, according to an official record of parliament’s debates seen on
Friday.

Mines Minister Winston Chitando had last month promised to remove the
requirements, which he said caused panic among foreign mining firms and were
contrary to the government’s push to open Zimbabwe to foreign investors.

The southern African nation has seen increased interest from foreign
investors since the downfall of Robert Mugabe in a de facto military coup in
November.

The amendments to the mining bill, which were passed on Thursday, also allow
the mines minister, after consulting with the president, to designate any
mineral as strategic if “it would be in the interests of the development of
the mining industry.”

Designating a mineral as strategic would grant the government greater
control over mining of that mineral.

Mining accounts for more than half of Zimbabwe’s export earnings but
investors had stayed away from the country, partly because of opaque black
economic empowerment rules.

The mining bill will also for the first time officially recognise
small-scale miners, who produce more than 40 percent of Zimbabwe’s gold
output, meaning that their operations will no longer be considered illegal.

U.S. aluminium tariffs; collateral damage and a missed target: Andy Home

(Reuters) - So the trade wars begin.

As of today the United States will impose tariffs on imports of steel and
aluminium from Canada, Mexico and the European Union (EU).

Canada and Mexico have already responded in kind. The EU won’t be far
behind.

Steel and aluminium are but pawns in a bigger trade game, the unique
characteristics of each supply chain forgotten as the U.S. administration
ratchets up the negotiating pressure on its NAFTA partners and adds autos to
its list of grievances with the EU.

The loss of focus is a shame because aluminium in particular shows why
tariffs are such a poor trade weapon, managing both to cause maximum
collateral damage and miss the prime target.

Which is China.

It is China’s dominance of the aluminium supply chain that lies at the heart
of the industry’s problems, both in the United States and everywhere else.

The country produces more than half of the world’s aluminium and has been
exporting massive quantities for many years.

The Trump administration’s trade salvoes won’t change that reality.

But they have galvanised a coalition of national industry bodies, including
the United States’ own Aluminum Association (AA), to try and push China
rather than tariffs onto the aluminium agenda at next week’s G7 summit in
Canada.

Graphic on US aluminium imports in 2017:

tmsnrt.rs/2JlAkwl

COLLATERAL DAMAGE

By levying a 10 percent import on Canadian aluminium, the United States has
just hit its largest single supplier.

Canada shipped 2.5 million tonnes of primary metal to its neighbour last
year, just over half of all imports.

It’s not only supposed to be a friend and ally but, to quote from the
Section 232 report which laid the ground for these tariffs, Canadian
aluminium supply is part of the two countries’ “integrated” industrial
defence base.

Only two of last year’s top 10 suppliers to the United States are
permanently exempt from tariffs: Argentina, which shipped 250,000 tonnes,
and Australia, which shipped 100,000 tonnes.

Which means that the price of aluminium is now significantly higher in the
United States than anywhere else.

The CME spot contract tracking the U.S. Midwest physical aluminium premium
is currently sitting at 21.25 cents per pound ($468 per tonne).

There is a Russian premium in that premium, reflecting the sanctions gun
aimed at Rusal, the second largest supplier of primary aluminium to the
United States last year.

But the Russian disruption is also being priced into higher premiums
everywhere else and Japanese buyers are still being offered aluminium at a
premium of just $160 per tonne for the next quarter.

U.S. aluminium consumers, it seems, will pay the price for the
administration’s stated aim of forcing U.S. smelter restarts.

However, with only around one million tonnes of dormant capacity, domestic
production is never going to plug the five-million tonne import gap, even if
can all be restarted.

The United States is going to remain a big importer of aluminium for the
foreseeable future.

Which means that tariffs, to quote Heidi Brock, president and CEO of the
U.S. Aluminium Association (AA), will do “little to address the China
challenge while potentially alienating allies and disrupting supply chains
that more than 97 percent of U.S. aluminium industry jobs rely upon.”

It is, she noted, “an unfortunate outcome”, which many in the U.S. aluminium
product supply chains may feel to be something of an understatement.

MISSED TARGET

Tariffs, meanwhile, will have only a limited impact on China.

It doesn’t export primary metal and its U.S.-bound shipments of aluminium
semi-manufactured products (“semis”) have been falling in recent years in
the face of multiple anti-dumping duties, most recently on aluminium foil.

China’s “semis” export flows, running at an annualised 4.6 million tonnes in
the first quarter, will simply be redirected, a prospect that is alarming
the European Aluminium Association (EAA).

GETTING GLOBAL

So the U.S., European, Japanese and Canadian aluminium associations are all
calling for multilateral talks with China.

Starting with next week’s G7 summit, where the aluminium coalition is
planning to present a “roadmap” to get things going.

There is a precedent for this in the steel market, where Chinese
overcapacity also led to the creation of a multilateral task force under the
auspices of the G20.

International pressure played its part in Beijing’s subsequent reform of its
leviathan steel sector, including the wholesale closure of both “illegal”
and “zombie” capacity.

China’s exports of steel products, which roiled the rest of the world just
as much as its aluminium exports, fell by 31 percent last year and were down
another 26 percent in the first three months of this year.

Could collective political pressure achieve something similar in aluminium?

The timing may be highly propitious for the type of
“government-to-government negotiations” called for by the aluminium
associations.

Beijing is already embarked on a restructuring of its aluminium sector. As
with steel, this has led to the closure of “illegal” capacity, meaning that
not fully permitted, and tight restrictions on new capacity.

It is also showing signs of wanting to shift its power-intensive smelters
away from “dirty” coal to “green” hydro power, a potentially massive
undertaking given some 90 percent of its aluminium production capacity is
based on thermal power. [

The AA’s Brock may well be right when she claims that “now is the time to
negotiate a long-term, enforceable agreement with China that tackles this
perennial problem once and for all.”

Jaw-jaw rather than war-war, to paraphrase Winston Churchill.

But will the Trump administration agree?

INVESTORS DIARY 2018

Company

Event

Venue

Date & Time

Edgars

AGM

Edgars Training Auditorium, 1st Floor, LAPF House, 8th Ave/Jason Moyo St,
Bulawayo

07/06/2018 9am

Turnall

AGM

Jacaranda Room, Rainbow Towers

07/06/2018 9am

FMHL

AGM

Royal Harare Golf Club

11/06/2018 2:30pm

RioZim

AGM

Head Office, 1 Kenilworth Road, Highlands

21/06/2018 10:30am

Zimbabwe

Heroes’ Day

Zimbabwe

13/08/2018

Zimbabwe

Defence Forces Day

Zimbabwe

14/08/2018

The Harare Agricultural Show

The Harare Agricultural Show

The Harare Agricultural Show

August 27- September 1

DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
Faith Capital (Pvt) Ltd for general information purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy or
subscribe for any securities. The information contained in this report has
been compiled from sources believed to be reliable, but no representation or
warranty is made or guarantee given as to its accuracy or completeness. All
opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
suitable for all investors. Securities of emerging and mid-size growth
companies typically involve a higher degree of risk and more volatility than
the securities of more established companies. Neither Faith Capital nor any
other member of Bulls ‘n Bears nor any other person, accepts any liability
whatsoever for any loss howsoever arising from any use of this report or its
contents or otherwise arising in connection therewith. Recipients of this
report shall be solely responsible for making their own independent
investigation into the business, financial condition and future prospects of
any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

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