Bulls n Bears Daily Market Commentary : 21 November 2018

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Bulls n Bears Daily Market Commentary : 21 November 2018

 


 

 


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

 


 

 


Zimbabwe Stock Exchange Update

 

Market Turnover $5,960,162.02 with foreign buys at $2,501,276.74 and foreign
sales were $881,047.50. Total trades were 180.

 

The All Share index recovered 0.87 points   to close at 156.34. OLD MUTUAL
LIMITED   led the movers with a $0.0709 gain to close at $7.8476, ECONET
recovered $0.0654 to $1.6531 and ZB FINANCIAL HOLDINGS   traded $0.0281
higher at $0.3700. AXIA   also added $0.0095 to $0.4495 and  PADENGA   was
$0.0085 firmer at $0.9300.

 

Three counters lost ground as TSL  lost $0.0782 to $0.5218 , BINDURA
dropped $0.0070 to end at $0.0650 and OK ZIMBABWE   was $0.0032 down at
$0.2950.

 

 

 <mailto:info at bulls.co.zw> 

 

 

  Global Currencies & Equity Markets

 

South Africa

 

South Africa's rand at 2-week high on improved risk appetite, stocks up

(Reuters) - South Africa’s rand raced to a two-week high against the dollar
on Wednesday, in line with a rebound in some other emerging market
currencies, as investors piled into riskier assets and sold the greenback.

 

Stocks were led higher by media and e-commerce firm Naspers as technology
stocks rebounded.

 

At 1529 GMT, the rand traded at 13.9175 per dollar, 1.26 percent firmer than
its close on Tuesday and its strongest level since Nov. 7.

 

The dollar index, which measures the greenback against a basket of major
currencies, weakened after posting its biggest daily percentage gain in two
weeks on Tuesday as a sell-off in world stocks spurred safe-haven bids.

 

South Africa-focused investors are waiting for the central bank’s interest
rates decision on Thursday. The South African Reserve Bank (SARB) said at
its last meeting in September it was concerned about the deteriorating
inflation outlook.

 

Headline consumer inflation rose to 5.1 percent year-on-year in October, in
line with expectations.

 

Forward rate markets were on Tuesday pricing in a near 50-50 chance of a 25
basis points rate increase, but on Wednesday that figure was down to a 30
percent probability, suggesting expectations were largely for rates to be
kept unchanged.

 

In fixed income, the yield on the benchmark government bond due in 2026 fell
8.5 basis points to 9.05 percent.

 

On the bourse, the blue chip Top-40 index firmed 0.64 percent to 45,132
points while the broader All-Share index was up 0.49 percent at 51,319
points.

 

Market heavyweight Naspers rose 3.77 percent to 2,716 rand as world
technology stocks gained after Tuesday’s sell-off.

 

South African retailer Lewis Group Ltd surged by 9.72 percent to 30.94 rand
after it reported an increase in half-year earnings.

 

“The most important thing is that they reduced their debt by more than 20
percent,” said Ryan Woods, equities trader at Independent Securities. 

 

 

 

Uganda

 

Ugandan shilling steady, expected to gain due to remittances and charity
flows

(Reuters) - The Ugandan shilling was steady on Wednesday but was forecast to
gain, lifted by slowing demand and flows from remittances and
non-governmental organisations, traders said.

 

At 1041 GMT commercial banks quoted the shilling at 3,715/3,725, stronger
than Tuesday’s close of 3,720/3,730.

 

 

 

       <mailto:info at bulls.co.zw> 

 

Asia

 

Asian shares tick up but growth worries keep investors on edge

(Reuters) - Asian shares stepped ahead cautiously on Thursday while oil
rebounded from a steep sell-off, though rising U.S. interest rates and
escalating trade tensions kept financial markets on edge amid signs of
slackening global growth.

 

MSCI’s broadest index of Asia-Pacific shares outside Japan tacked on 0.2
percent and has so far managed to hold up in November after three straight
monthly declines. For the year, it is on track for its worst annual
performance since 2011, in part due to anxiety over a weakening outlook for
corporate profits and the heated Sino-U.S. trade war.

 

Japan’s Nikkei rose 0.7 percent while Australian shares advanced 0.6
percent.

 

Overnight in Wall Street, the benchmark S&P 500 stock index ended higher but
near session lows while the Dow gave up its gains to end flat ahead of the
U.S. Thanksgiving holiday in a sign of lingering bearishness.

 

The U.S. unemployment rate is at a 49-year low and the economy is expanding
at a 3.5 percent annual rate, although many economists now believe a
ballooning U.S. federal budget deficit and trade protectionism could hurt
growth by 2020.

 

The synchronised global expansion that began roughly two years ago has now
plateued, and fresh signs are emerging of a weaker outlook. Global trade
volumes are still increasing although at a slower pace.

 

Moreover, leading economic indicators monitored by the OECD have weakened
since the start of the year and point to slower expansion ahead for the
United Kingdom and the euro area as a whole.

 

ALL-WEATHER CURRENCY

 

The Federal Reserve has stayed on its tightening path after ending seven
years of near-zero interest rates in December 2015 that took the Fed funds
rate to the current 2.00 to 2.25 percent. Investors expect the Fed to go
again in December.

 

In response to the tightening, the U.S. dollar has outperformed most of its
peers this year with its index against a basket of major currencies up
almost 5 percent. In comparison the Japanese yen is flat so far in 2018.

 

Marios Hadjikyriacos, analyst at broking firm XM.Com, said the greenback is
currently an “all weather currency.”

 

Hadjikyriacos expects the dollar to end the year on a high note.

 

The dollar index was last flat at 96.697. The yen was barely changed at
113.07 following two straight sessions of losses.

 

Elsewhere, the euro rose on hopes that the Italian budget dispute would be
resolved even as the European Commission took its first step toward
disciplining Italy over its deficit. It was last at $1.1386.

 

Oil jumped after U.S. government data showed strong demand for gasoline and
diesel, though concerns over rising crude supply remained.

 

U.S. crude futures edged up 10 cents to $54.73 after hitting a one-year low
of $52.77 on Tuesday. Brent opened stronger at $63.60, up 12 cents from the
last close and well off Tuesday’s trough of $61.71.

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

Commodities Markets

 

 

Copper prices drop as U.S.-China trade war threatens growth

(Reuters) - Copper prices edged down on Thursday, shedding some of previous
session’s gains on worries over slowing global economic growth amid an
escalating trade war between Washington and Beijing.

 

Trade tensions and higher interest rates are slowing the global economy,
though for now there are no signs of a sharp downturn, the Organisation for
Economic Cooperation and Development (OECD) said, lowering outlook for next
year to 3.5 percent from a previously projected 3.7 percent.

 

The United States and China clashed on Wednesday at a World Trade
Organization (WTO) meeting with a U.S. envoy accusing Beijing of using the
WTO to pursue “non-market” policies and a Chinese official saying it was
Washington that was flouting the rulebook.

 

FUNDAMENTALS

* Three-month copper on the London Metal Exchange was down 0.1 percent at
$6,229.50 a tonne, as of 0223 GMT, while the most-traded copper contract on
the Shanghai Futures Exchange edged up 0.2 percent to 49,510 yuan
($7,146.26) a tonne.

 

* Expectations of a supply avalanche have been hitting the nickel market
next year due to new capacity in Indonesia, but analysts doubt the plans
spearheaded by Chinese firms can be carried out so quickly.

 

* Nickel stockpiles on the Shanghai Futures Exchange SNI-TOTAL-D edged down
to 14,911 tonnes on Wednesday, but still near a three-month high. However,
nickel stockpiles on the LME warehouse MNISTX-TOTAL is still below a
five-year low.

 

* The most traded nickel contract on the Shanghai Futures Exchange lost 1.5
percent to 91,000 yuan a tonne, trading around a 11-month low level, while
London’s three-month nickel contract edged down 0.1 percent.

 

 

 

China's aluminium output drops as Shanghai price sinks: Andy Home

(Reuters) - The Shanghai aluminium price hit its lowest level since October
2016 on Wednesday.

 

At a current 13,700 yuan per tonne the most active contract on the Shanghai
Futures Exchange (ShFE) is down by 13 percent from the start of January.

 

The London Metal Exchange aluminium price has also been under pressure from
bearish funds but is down by a relatively mild 6 percent on the start of the
year.

 

Aluminium’s persistent price weakness is compressing producer margins
everywhere but the pressure is greatest in China and there are signs that it
is claiming ever more smelter victims.

 

Chinese production dropped sharply last month, according to the
International Aluminium Institute (IAI), and unless the Shanghai market can
break out of its downtrend, more smelter casualties seem likely.

 

The flip side is that the aluminium market probably doesn’t need to worry
much about the impact of this year’s winter heating season restrictions in
China since price has taken over from smog as the key driver of short-term
output trends in the world’s largest producer.

 

Graphic on Shanghai aluminium, relative to LME:

 

tmsnrt.rs/2R5GRfD

 

SINKING SHANGHAI

Hedge funds don’t much like aluminium’s short-term price prospects.

 

All the LME base metals have found themselves the wrong side of the trade
war trade, as short-sellers bet on economic slowdown, particularly in China,
to dampen demand.

 

Aluminium’s own dynamics are soggy with falling but still large off-market
stocks, plentiful scrap supply and growing confidence that a U.S. sanctions
deal will be reached with Russian producer Rusal.

 

Chinese speculators don’t like aluminium either and, in Chinese style,
they’re expressing their view by moving to other markets.

 

The most recent three-month slide in the Shanghai price has been accompanied
by a noticeable drop in trading activity on the ShFE aluminium contract.

 

Volumes in October slumped 37 percent from last year, while cumulative
volumes in the first 10 months of this year were down by 25 percent.

 

The looming seasonal slowdown in demand and expectations of a limited supply
hit from this year’s winter heating season restrictions are unlikely to
entice investors back any time soon.

 

Graphic on global aluminium production, monthly annualised change:
tmsnrt.rs/2QW8g3u

 

PRESSURE DROP

The Shanghai aluminium price is now at a level where significant numbers of
smelters are suffering extreme margin compression.

 

Some are closing. Two smelters in the province of Qinghai with combined
capacity of 270,000 tonnes per year have gone off line in the last couple of
weeks, according to BMO Capital Markets.

 

BMO estimates total closures this year now amount to around 1.8 million
tonnes of smelter capacity.

 

The pace seems to be quickening as the price continues sinking.

 

The latest IAI estimates of Chinese production suggest a sharp
month-on-month drop in average daily output to 98,390 tonnes in October, the
lowest national run-rate since March.

 

Annualised production has fallen by almost 1.2 million tonnes since June
with price pressures interacting with Beijing’s ongoing structural reform of
its aluminium industry.

 

The official production figures released by the National Bureau of
Statistics are consistently lower than those of the IAI but they too
indicate declining production over the last three months.

 

Average smelter production costs in China are now 800-1,000 yuan-per-tonne
above the current metal price, according to Paul Adkins of aluminium
consultancy AZ China.

 

Chinese smelters have been here before, most recently in 2015 when the
Shanghai price slumped to 10,000 yuan.

 

Back then the price was 2,000 yuan below average production costs,
suggesting many producers will soldier on in the short term, according to
Adkins.

 

However, with prices still sliding and demand likely to slacken into the
Chinese winter, “it’s only a question of when” more curtailments happen, he
said.

 

PRICE TRUMPS POLLUTION

Price has overtaken pollution as the key determinant of Chinese production
dynamics over the coming months.

 

The impact of last year’s blanket curtailments on heavy industries,
including aluminium, in the region around Beijing over the winter heating
months underwhelmed the market.

 

Several key producers persuaded the authorities that “illegal” capacity
already closed could count towards their winter cutback targets.

 

Demand, meanwhile, appeared to take as big a hit as production thanks to a
complete cessation of building activity in the smog-impacted areas.

 

This year there will be no central government mandate on cutbacks. Rather,
each local administration will set its own smog reduction targets, a policy
shift widely expected to lessen further any hit on aluminium production.

 

On paper at least, production of the raw material alumina could be more
vulnerable to winter heating restrictions this time around.

 

But as Adkins of AZ China points out, “the irony (is that the alumina)
refineries that were ordered to close 50 percent for winter were already
running at half pace due to lack of bauxite.”

 

Another reminder that China’s environmental crackdown is continuing with
bauxite, the first input into the aluminium-making process, just one of many
mining targets for Beijing’s inspectors.

 

Although there will be winter curtailments of both operating aluminium and
alumina capacity, the impact of lower prices on an already strained
production chain is going to be greater.

 

STILL DOMINANT

China’s share of global aluminium production is undiminished at around 56
percent in October.

 

That’s in part because production outside of China is doing no more than
creep very gently higher.

 

The rest of the world’s output in the first 10 months of this year was up by
1.7 percent on last year, according to the IAI. October’s annualised
run-rate of 26.1 million tonnes was just 200,000 tonnes higher than that in
October 2017.

 

Smelter restarts in the United States on the back of import tariffs are
still being largely offset by outages in Canada, Brazil and margin cost
attrition at some of the world’s smaller plants.

 

For now, in other words, China remains the dominant force in global
aluminium production trends, which is why it’s worth keeping a close eye on
that sinking Shanghai price.

 

$1 = 6.9420 Chinese yuan renminbi

 


 

INVESTORS DIARY 2018

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


Finance minister Mthuli Ncube presents 2019 National Budget

Parliament

22/11/2018

 


Simbisa Brands

AGM

Standards Association of Zimbabwe, Northend Close, Borrowdale

23/11/2018 (8:15am)

 


Axia

AGM

Chapman Golf Club, Eastlea

27/11/2018 (8:15am )

 


Econet

AGM

Econet Park, Msasa

29/11/2018  (9am )

 


Econet

EGM

Econet Park, Msasa

29/11/2018  (10am )

 


GetBucks

AGM

Conference Room 1, Monomotapa Hotel

04/12/2018 (10am )

 


Innscor

AGM

Royal Harare Golf Club

05/12/2018 (8:15am)

 


Truworths

AGM

Boardroom, Prospect Park, 808 Seke Road

06/12/2018 (9am)

 


TSL

EGM

Head Office, 28 Simon Mazorodze Road, Southerton

07/11/2018 (10am )

 


Cassava shares list on the ZSE

 

11/12/2018

 


 

 

 

 

 


 

 

 

 


 

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

 


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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