Bulls n Bears Daily Market Commentary : 10 October 2018

Thu Oct 11 07:41:26 CAT 2018

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Bulls n Bears Daily Market Commentary : 10 October 2018

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Zimbabwe Stock Exchange Update

Market Turnover $20,041,943.04 with foreign buys at $19,151,011 and foreign
sales were $962,865. Total trades were 154.

The All Share index added another 24.53 points  to close at 176.52 points
after BRITISH AMERICAN TOBACCO  gained $5.0000 to settle at $33.0000 whilst
OLD MUTUAL  went further up by $1.7600 to close at $10.6000. DELTA  also
increased by $0.6050 to end at $3.6400, ECONET  traded $0.4054 higher at
$2.4425 and  INNSCOR  was $0.3375 stronger at $2.0275.

There were no trades in the negative territory as MEIKLES  traded unchanged
at $0.6500.

 <mailto:info at bulls.co.zw> 

  Global Currencies & Equity Markets

Zimbabwe

IMF and World Bank okay Zimbabwe plan to clear arrears as dollar woes bite

(Reuters) - The World Bank and IMF have endorsed Zimbabwe’s plan to clear
$2.2 billion in arrears to international creditors, the finance minister
said on Wednesday, but U.S. sanctions may still prevent fresh loans to
support the rebuilding of a shattered economy

President Emmerson Mnangagwa has promised to revive the economy, pay foreign
debts that the country has defaulted on since 1999 and end the international
pariah status that Zimbabwe acquired under Robert Mugabe’s near four-decade
rule.

But the economy remains in crisis with an acute shortage of dollars, the
collapse in the value of the country’s parallel ‘bond note’ currency and
many businesses struggling to operate.

Paying debt arrears could potentially open access to financing from the
International Monetary Fund, World Bank and other development institutions,
but the United States, which is the bank and fund’s largest member country
is an obstacle.

It still maintains sanctions on Harare and is unlikely to support financing
for Zimbabwe until the new government makes progress on reforms, including
changing laws restricting media freedom and anti-government protests.

Finance Minister Mthuli Ncube, who is attending IMF and World Bank meetings
in Bali, Indonesia, said in a statement his plans to clear the arrears to
the World Bank, African Development Bank and European Investment Bank had
been accepted.

Ncube said he met U.S. Deputy Assistant Secretary of the Treasury Eric Meyer
who said Washington was willing to help and that Harare should see the
sanctions “in a positive way”.

The lenders and Western donors in Bali urged Ncube to “judiciously”
implement his two-year economic recovery programme announced last Friday,
the statement said.

Ncube’s plan will see cuts in government spending and its wage bill, and
privatisation of loss-making state-owned firms.

HYPERINFLATION TRAUMA

Zimbabwe, which adopted the U.S. dollar after hyperinflation left its own
currency worthless in 2009, is gripped by acute shortages of cash dollars.
Prices of basic goods, public taxis and medicines have risen in the last few
days.

At the heart of its economic problems is a $17 billion domestic and foreign
debt, a $1.8 billion trade deficit that has worsened dollar shortages and
lack of confidence in the ruling party by citizens still traumatised by
hyperinflation.

The economic crunch is increasing political tension after a July vote that
was supposed to lay the foundation for Zimbabwe’s recovery was instead
followed by turmoil that left six people dead after an army crackdown.

The latest crisis was triggered by fiscal and monetary changes announced on
Oct. 1, including a 2 percent tax on money transfers and separation of cash
dollars and foreign inflows from bond notes and electronic dollars, that
caused the collapse of the surrogate currency on the black market.

On Wednesday, some shops and restaurants, including the local franchise of
fast-food chain KFC had closed their outlets because some suppliers of goods
and medicines were demanding cash dollars.

When the fiscal changes were announced, $100 in bond notes was worth $49
cash dollars but was worth only $26 on Wednesday.

In a separate statement, Ncube said the bond note and electronic dollars
would remain officially pegged at 1:1 to the U.S. dollar as the government
seeks to protect people’s savings. 

South Africa

South Africa's rand weakens, stocks hit three-month low

(Reuters) - South Africa’s rand weakened on Wednesday, giving back gains it
made following Tito Mboweni’s appointment as fiance minister, with investors
banking profits ahead of a ratings decision on Friday.

In the equities market, stocks were hammered by losses of market-heavyweight
Naspers.

At 1643 GMT the rand was 0.81 percent weaker at 14.6725, having rallied as
far as 14.5200 overnight on some investor relief over the appointment.

The currency breached the crucial 15.00 level on Monday on reports Nhlanhla
Nene wanted to quit the Treasury, with selling pressure exacerbated by a
stronger dollar and investor weariness ahead of an expected ratings review
by Moody’s on Friday.

With the Treasury impasse out of the way dollar longs quickly resumed
supremacy, spurred by U.S. bond yields hovering at multi-year peaks,
diminishing the carry trade appeal of currencies like the rand.

Bonds also paused their rally, with yield on the benchmark 2026 paper up 1
basis point to 9.23 percent

The Johannesburg All-Share index fell to a near three-month low and the
Top-40 index declined to a six-month low.

The all-share index weakened 2.54 percent to 52,813 points, while the Top-40
index fell 2.8 percent to 46,625 points.

Naspers bore the brunt of China’s Tencent after the gaming and social media
giant stumbled to its lowest level since July last year as JP Morgan cut its
price target to HK$400 from HK$460.

Naspers, which owns a 31.2 percent stake in Tencent, tumbled 6.47 percent to
2,656.98 rand, the lowest since July 2017.

Weaknesses were also exacerbated by a general decline in global technology
firms.

Some of the dual-listed companies mirrored global stocks, with jeweller
Richemont down 4.23 percent at 108.30 rand and packaging and paper firm
Mondi, which is also listed in London, down 6.99 percent to 353.03 rand. 

       <mailto:info at bulls.co.zw> 

Asia

Asia shares trampled in Wall St rout, eyes on China

(Reuters) - Asian share markets sank on Thursday after Wall Street suffered
its worst drubbing in eight months, a conflagration of wealth that could
threaten business confidence and investment across the globe.

It also raised the stakes for U.S. inflation figures due later on Thursday
as a high outcome would only stoke speculation of more aggressive rate hikes
from the Federal Reserve.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.9 percent
to its lowest in 17 months.

Japan’s Nikkei sank 3.2 percent in early trading, which would be the biggest
daily drop since March.

On Wall Street, the S&P500 suffered its biggest one-day fall since February
as technology shares tumbled on fears of slowing demand. The S&P technology
sector dropped 4.8 percent, with Apple Inc down 4.6 percent.

The S&P 500 ended Wednesday with a loss of 3.29 percent and the Nasdaq
Composite 4.08 percent, while the Dow shed 2.2 percent.

The blood letting was bad enough to attract the attention of U.S. President
Donald Trump, who pointed an accusing finger at the Fed for raising interest
rates.

“I really disagree with what the Fed is doing,” Trump told reporters before
a political rally in Pennsylvania. “I think the Fed has gone crazy.”

It was hawkish commentary from Fed policy makers that triggered the sudden
sell off in Treasuries last week and sent long-term yields to their highest
in seven years.

The surge made stocks look less attractive compared to bonds while also
threatening to curb economic activity and profits.

YUAN A FLASHPOINT

The shift higher in yields also threatens to suck funds out of emerging
markets, putting particular pressure on the Chinese yuan as Beijing fights a
protracted trade battle with the United States.

China’s central bank has been guiding its yuan steadily weaker, breaking
past the psychological 6.9000 barrier and leading speculators to push the
dollar up to 6.9234.

That has forced other emerging market currencies to weaken to stay
competitive, and drawn the ire of the United States which sees it as an
unfair devaluation.

There was also a danger for the U.S. if Beijing had to intervene heavily to
support the yuan.

The dollar was already losing ground to both the yen and the euro, as
investors favoured currencies of countries that boasted large current
account surpluses.

The euro pushed up to $1.1538 and away from a low of $1.1429 early in the
week. The dollar fell back to 112.10 yen , a telling retreat from last
week’s 114.54 peak.

That left the dollar at 95.408 against a basket of currencies.

In commodity markets, gold got a modest safety bid and edged up to
$1,193.71. Oil prices skidded in line with U.S. equity markets, even though
energy traders worried about shrinking Iranian supply from U.S. sanctions
and kept an eye on Hurricane Michael, which closed some U.S. Gulf of Mexico
oil output.

U.S. crude was off 52 cents at $72.65 in Asia, while Brent crude had yet to
trade after falling 2.3 percent overnight to end at $83.09 a barrel.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Base metal prices fall, tracking equities rout on macro fears

(Reuters) - Base metals prices fell sharply in Shanghai and London in early
Asian trade on Thursday, tracking a broad sell-off on equity markets as a
gloomy macro-economic outlook raised concerns over demand growth.

    FUNDAMENTALS

* LME COPPER: Three-month copper on the London Metal Exchange fell 1.1
percent to $6,171.50 a tonne by 0139 GMT, extending a 0.8 percent drop in
the previous session. 

* SHFE COPPER: The most-traded November copper contract on the Shanghai
Futures Exchange slipped by 1.2 percent to 50,080 yuan ($7,234.49) a tonne.

* OTHER METALS: Shanghai aluminium and nickel  both fell around 1.6 percent,
while zinc slipped 1 percent. Lead and tin were the only gainers, nudging up
0.3 and 0.5 percent, respectively.

* ALUMINA: Norway's Norsk Hydro is focused on a return to full output at its
Alunorte alumina refinery in Brazil and is not contemplating layoffs there,
CEO Svein Richard Brandtzaeg told Reuters on Wednesday.

* ALUMINIUM: Rio Tinto is close to restarting a sale process for some of its
aluminium assets, including a plant in Iceland, which have been valued at
around $350 million, two sources familiar with the matter said.

* LITHIUM: Chile has called for lithium to be traded on the London Metals
Exchange to provide greater "clarity" about its value, mining minister Baldo
Prokurica said on Wednesday. 

CHILE: The controlling shareholder in Chilean lithium producer SQM, on
Wednesday filed suit with Chile's Constitutional Court to block a deal
allowing the sale of nearly one-fourth of the miner to China's Tianqi
Lithium Corp

.

* SHFE: The Shanghai Futures Exchange will add lead, zinc, tin and nickel to
its new physical trading platform from Oct. 18, the exchange said in a
statement on Wednesday. 

Dollar shortage "short-term problem" for miners in Zimbabwe- minister

(Reuters) - A dollar shortage that has sparked outrage from mining companies
operating in Zimbabwe is a “short-term problem” that will be remedied by a
stronger economy, the mines minister told Reuters.

Zimbabwe is suffering acute shortages of U.S. dollars, deterring foreign
capital from helping the ailing economy recover after 20 years of economic
hardship under former leader Robert Mugabe.

Companies are allowed to retain 30 percent of foreign currency they earn,
Chitando said, and can make an application to the Treasury if they need
more.

Zimbabwe holds the second largest deposits of platinum and chrome after
South Africa and has the potential to be a major lithium supplier.

Foreign investor interest in the country is growing after Mugabe’s removal
in a coup last November and President Emmerson Mnangagwa’s election in
August but projects are constrained by lack of funding.

Zimbabwe needs up to $11 billion to modernise its mines, the head of the
country’s Chamber of Mines said in May.

A Zimbabwe economic plan released on Friday said the government would back
initiatives by mining houses operating in Zimbabwe to float syndicated bonds
offshore, “as part of companies’ efforts to raise capital offshore to
finance re-tooling of antiquated mines.”

Mining investors have said they need regulatory certainty and the removal of
foreign exchange restrictions that limit how much money companies can take
out of Zimbabwe due to the dollar shortage.

For mining firms, dollar shortages are so severe that there is a risk of
some mines shutting down, an industry source said.

Zimbabwe abandoned its own hyperinflation-hit currency in 2009 in favour of
the U.S. dollar, but a widening trade deficit, lack of foreign investment
and a decline in remittances by Zimbabweans abroad have helped to fuel
foreign currency shortages.

Other forms of payment used in Zimbabwe are bond notes and dollars stored
electronically in bank accounts, known as “zollars”.

On Tuesday, Zimbabwe’s gold miner RioZim said it would take legal action to
force the central bank to pay it in dollars for part of its output.

Meanwhile, platinum miners will make a decision by the end of November on
plans to jointly process platinum locally to avoid a 15 percent tax on
exports of the raw mineral due to be in place by January 2019, Chitando
said.

Platinum miners operating in Zimbabwe including Anglo American Platinum, the
local unit of Impala Platinum , Zimplats and Sibanye-Stillwater currently
send output to refineries in South Africa.

Impala Platinum spokesman Johan Theron said it was a “legitimate aspiration”
for miners to process platinum in Zimbabwe, but added that “any expenditure
in refining competes directly with expenditure in growing the production
base”.

Chitando also said a mining bill that was sent back to parliament by
Mnangagwa should be reviewed by the national assembly by December following
amendments.

INVESTORS DIARY 2018

Company

Event

Venue

Date & Time

 <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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