Bulls n Bears Daily Market Commentary : 22 June 2018

Fri Jun 22 15:27:13 CAT 2018

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Bulls n Bears Daily Market Commentary : 22 June 2018

 <http://www.posb.co.zw/> 

Zimbabwe Stock Exchange Update

The All Share index closed the week lower at 108.76 points following a 0.94
points   loss. OLD MUTUAL shed $0.0835 to close at $6.0021, ECONET   slipped
$0.0454 to trade at $1.1192 whilst OK ZIMBABWE   eased $0.0063 to $0.2186.
ARISTON went down by $0.0028 to end at $0.0140 and DELTA was $0.0014 weaker
at $1.8996.

ZIMPAPERS was the only counter in the positive territory gaining $0.0018 to
settle at $0.0133.

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets

South Africa

South Africa's rand firmer as technicals, easing dollar offer support

(Reuters) - South Africa’s rand firmed slightly early on Friday, extending
its recovery from a near 7-month low against the dollar hit this week with
the help of technical factors and an easing dollar.

* At 0615 GMT, the rand traded at 13.5500 per dollar, 0.3 percent firmer
than its close on Thursday.

* The rand has had a volatile week, falling to its weakest since Nov. 27 on
Tuesday as U.S.-China trade war fears hit risk appetite. Sentiment has also
been weighed by a string of poor local economic data.

* But the currency had been in oversold territory according to momentum
indicators tracked by charters, and this offered the currency technical
support.

* “This morning the rand trades marginally firmer despite the disappointing
local data,” Nedbank analysts wrote in a note. “As has been alluded to
recently the rand has potential for a short term technical correction to the
downside, over the most recent sessions, the current levels around the mid
13.50’s have held steady.”

* In fixed income, the yield for the benchmark government bond due in 2026
was down 0.5 basis points to 8.915 percent.

Kenya

Kenyan shilling firm against the dollar, tight liquidity helps

(Reuters) - The Kenyan shilling was firm against the dollar on Friday,
helped by tight liquidity in the money markets, traders said.  

At 0707 GMT, commercial banks quoted the shilling at 100.70/90 per dollar,
compared with 100.80/101.00 at Thursday's close.

America

Dollar drops off 11-month high; sterling bounces after hawkish BOE

(Reuters) - The dollar fell from an 11-month peak against a basket of major
currencies as investors took profits in early Asian trade on Friday, while
sterling rebounded from a seven-month low after a slightly hawkish tilt from
the Bank of England surprised the market.

The Philadelphia Federal Reserve’s manufacturing index fell sharply to a
1-1/2 year low, raising concern about the world’s largest economy and
prompting some traders to book profits on bullish dollar bets, analysts
said.

The Philadelphia Fed index on U.S. Mid-Atlantic business activity fell to
19.9 in June from 34.4 in May, its steepest fall since January 2014.

Lower yields on U.S. Treasuries and the euro finding chart support in the
$1.15 area also contributed to the dollar’s weakness.

Escalation in the U.S.-China trade conflict had underpinned safe-haven
support for the dollar in recent days. The Philly Fed weaker data dragged
down U.S. Treasury yields, with the 10-year yield falling to 2.897 percent
in North American trade overnight.

The dollar index, which tracks the greenback against six other currencies,
edged 0.1 percent lower to 94.792 on Friday, after touching 95.533, its
highest level since last July.

The euro rebounded from a fresh 11-month low of $1.1508 it hit overnight
after testing technical support in the $1.15 area. It last traded $1.1614,
up 0.1 percent on the day.

The single currency had fallen on bets of a protracted period of monetary
policy divergence between the U.S. Federal Reserve and the European Central
Bank.

In addition, the Italian government’s appointment on Thursday of two euro
sceptics to head key finance committees reignited worries about anti-euro
voices in the euro zone’s third-largest economy.

Against the yen, the greenback was little changed and last traded 109.95
yen.

The British pound rose 0.7 percent to $1.3270 overnight, recovering from a
seven-month trough, after BOE Chief Economist Andy Haldane unexpectedly
joined the minority of policymakers calling for rates to rise to 0.75
percent, citing concerns about growing wage pressure.

Sterling last traded 1.3262, not far from Thursday’s high.

The Canadian dollar hit a fresh one-year low of C$ 1.3336 overnight,
pressured by lower oil prices and an uncertain outlook for trade, with
investors eyeing a meeting of major oil producers.

The Organization of the Petroleum Exporting Countries meets on Friday to
decide output policy amid calls from top consumers such as the United
States, China and India to cool down oil prices and support the world
economy by producing more crude.

Iran, OPEC’s third-largest producer, has so far been the main barrier to a
new deal as it said OPEC was unlikely to reach an agreement and should
reject pressure from U.S. President Donald Trump to pump more oil.

Elsewhere, the Mexican peso hit 20.2000 peso per dollar , its strongest
level in more than two weeks after Mexico’s central bank increased benchmark
rates by a quarter point to 7.75 percent in a bid to hold down inflation.

Commodities Markets

US aluminium smelters restart slowly; Chinese exports boom: Andy Home

(Reuters) - It’s been three months since President Trump announced the
imposition of 10 percent tariffs on U.S. imports of aluminium.

It’s been three weeks since he removed temporary tariff exemptions on
imports from key allies, including Canada, the largest supplier of aluminium
to the United States.

The winds of trade war are blowing ever harder. European Union
counter-duties on U.S. goods kick in today.

But the Trump Administration will take some comfort from the fact that the
tariffs are achieving their stated aim, namely the revival of the country’s
dormant aluminium production capacity.

It’s going to be a slow process, literally stop-start in the case of Alcoa’s
Warrick smelter in Indiana.

And it’s not going to reverse years of shrinkage in the U.S. production
base. Alcoa has also just announced the dismantling of a long idled potline
at its Wenatchee plant in Washington.

However, the needle on the dial has started moving in the direction of the
Administration’s target of a national operating rate of 80 percent of
capacity.

The only problem is that this slow revival risks being overshadowed by a
boom in exports from China, the country everyone other than the Trump
Administration views as the core threat to the rest of the world’s aluminium
sector.

A STOP-START REVIVAL

The United States produced 785,000 tonnes of primary aluminium last year,
with a little over 1.1 million tonnes of production capacity idled.

Some of that latent capacity is now being restarted.

Alcoa announced in July last year it was reactivating three lines with
capacity of 161,400 tonnes per year at its Warrick smelter.

The process was due to be completed this quarter but one line with capacity
of 50,000 tonnes per year has been taken down again after a late-May power
outage.

Aluminium smelting requires an uninterrupted flow of power to keep the metal
in a molten state as it is purified. Unexpected outages can cause damage to
the plant itself, which is why Alcoa moved quickly to close it.

Two steps forward, one step back.

As is also the case with Century Aluminum.

It is refiring one 50,000-tonne per year line at its Hawesville smelter in
Kentucky, the company told analysts on its Q1 results call.

Another two lines with combined capacity of 100,000 tonnes per year are
awaiting restart, with Century guiding towards full Hawesville capacity in
the second half of next year.

However, the company has just taken down one of three production lines at
its Sebree smelter, also in Kentucky, after an “electrical failure”.

It will take around three months to restore fully the line, although the
loss to production should be less than 18,000 tonnes, it said.

The only other primary aluminium player in the United States, the
Swiss-owned Magnitude 7 Metals, said in March it intended to restart two
lines at its New Madrid smelter in Missouri, with no update since then.

Even if all this capacity returns, however, it won’t turn the dial back on
the U.S. aluminium smelter clock.

A reminder of how long the decline has been running came from Alcoa, which
announced it will close one line “permanently” at its Wenatchee smelter

The last time that particular line produced any aluminium was in 2001.

The remaining three lines at Wenatchee are still idle.

While the Trump Administration’s tariffs coax dormant smelter capacity back
into life, they have no impact on the world’s largest producer.

China exported around 437,000 tonnes of aluminium in semi-manufactured form
(“semis”) last month, the second-highest total ever.

However, an estimate of “semis” export flows can be calculated from the
preliminary figures by deducting the relatively small and stable outbound
flow of unwrought metal, both primary and alloy.

Shining through the statistical clouds is one very clear trend.

Exports of “semis” are rising fast. They were up around 14 percent on last
year in the first five months of 2018 and the cumulative total of 1.98
million tonnes is a record.

In part this is also down to the Trump Administration. Its sanctions on
Russian oligarch Oleg Deripaska and his Rusal aluminium empire sent the
aluminium price soaring in April.

The resulting arbitrage window has incentivised Chinese product makers to
lift exports to unprecedented levels.

In part, though, rising exports are simply a reflection of China’s
continuing aluminium ascendancy.

The country’s national run-rate accelerated by around 780,000 tonnes to an
annualised 36.4 million tonnes over the course of January-May, according to
the International Aluminium Institute, using its new methodology.

Production is recovering from the mandated winter heating season
curtailments and new capacity is still coming online even as the authorities
try and force out “illegal” capacity.

China’s aluminium smelter sector is experiencing its own turbulence as it
experiences Beijing’s “structural reform” processes.

But China’s share of global production has been creeping higher again. It
was just under 57 percent last month.

ALL CHANGE, NO CHANGE?

China, it’s worth reiterating, does not export aluminium in primary metal
form.

Years of vertical integration, though, have made it the dominant producer
and exporter of metal in first-stage fabricated form.

The more “semis” China exports, the greater the displacement effect on
demand for primary metal everywhere else.

In a global market the effect is to pressure the global aluminium price.

Even tariffs only partially shield against these structural mega-trends,
given the United States’ continued import dependency both at primary metal
and product level of the value chain.

China was still the largest supplier of aluminium “semis” to the United
States last year despite a rising wall of product-specific anti-dumping
duties.

When it comes to aluminium, the Trump Administration’s focus is going to
remain firmly on the dial of national production capacity utilisation.

The rest of the world’s focus, though, is going to remain firmly on how much
aluminium is coming out of China every month.

Zinc hits 10-month low as investors bet on rising supply

(Reuters) - Zinc prices hit their lowest in 10 months on Friday as traders
eyed rising stocks and bet on increased mine supply, while bellwether copper
headed for a second week of falls on fears a trade war between Washington
and Beijing would hit demand.

Zinc stocks in London Metal Exchanges warehouses MZNSTX-TOTAL stood at
247,250 tonnes at last count, up 87 percent since March 1 this year. Some
880,000 tonnes of additional zinc mine capacity is due to come on stream
this year, according to the International Lead Zinc Study Group (ILZSG).

Copper was hit by increasingly sharp rhetoric between the United States and
China, and growing evidence of the economic damage such a conflict could
produce, though it was underpinned by a weaker dollar.

* ZINC PRICES: Three-month LME zinc hit $2,889.50 a tonne, its lowest since
last year August. It traded up 0.5 percent at $2,930 a tonne in official
midday rings, but was heading for a 5 percent fall on the week.

* COPPER: Copper was last bid up 0.3 percent in rings at $6,808 a tonne but
was heading for a weekly fall of around 3 percent.

* AUTOS: Germany’s Daimler cut its 2018 profit forecast and BMW said it was
looking at “strategic options” because of a trade war between China and the
United States, sparking fears of a wave of earnings downgrades in the auto
industry.

* TARIFFS: U.S. President Donald Trump threatened on Monday to hit $200
billion of Chinese imports with 10 percent tariffs if China retaliates
against his previous targeting of $50 billion in imports.

* COPPER PRODUCTION: The global refined copper market had a surplus of
55,000 tonnes in March and 87,000 tonnes in February, the International
Copper Study Group said.

* CHINA STEEL: Shanghai steel prices fell on Friday, posting their biggest
weekly loss since March, with risk appetite curbed by signs that a tariff
war between China and the United States is hitting global companies.

* TIN EXPORTS: Indonesia’s refined tin exports in May surged 79 percent to
12,493.35 tonnes, data from the Trade Ministry showed on Friday.

* METALS PRICES: Aluminium was last bid down 0.4 percent at $2,171 a tonne,
lead was last bid up 1.1 percent at $2,402, tin traded up 0.2 percent at
$20,550 while nickel traded up 2.2 percent at $15,325.

INVESTORS DIARY 2018

Company

Event

Venue

Date & Time

SeedCo

final dividend of 2.95c and special dividend of 1.48c and sets record date

22/06/2018

GB Holdings

AGM

Cernol Chemicals Boardroom, 11 Dagenham Road, Willowvale

26/06/2018 11:30am

MedTech

AGM

Head Office, Boardroom, Stand 619, Corner Shumba/Hacha Roads, Ruwa

27/06/2018 3pm

Dawn Properties

AGM

Ophir Room, Monomotapa Hotel

28/06/2018 10am

NicozDiamond

Scheme meeting

7th Floor, 30 Samora Machel Ave

28/06/2018 10am

ZBFH

AGM

Boardroom, Ground Floor, 21 Natal Road, Avondale

28/06/2018 10:30am

African Sun

AGM

Kariba Room, Holiday Inn Harare

28/06/2018 12pm

FBC

AGM

Royal Harare Golf Club

28/06/2018 3pm

Hwange

AGM

Royal Harare Golf Club

29/06/2018 10:30am

Fidelity Life

AGM

Great Indaba Room, Monomotapa Hotel

29/06/2018 11am

Barclays

EGM to consider the change of registered statutory name to First Capital
Bank Limited

Meikles Hotel

03/07/2018 3pm

NicozDiamond

shares delist from the ZSE

06/07/2018

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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