Bulls n Bears Daily Market Commentary : 12 October 2018

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Bulls n Bears Daily Market Commentary : 12 October 2018

 


 

 


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Zimbabwe Stock Exchange Update

 

 

 

Market Turnover $9,709,051.35 with foreign buys at $122,398 and foreign
sales were $249,310. Total trades were 307.

 

The All Share index came off by 8.02 points  to close the week at 200.29
points. OLD MUTUAL  led the shakers with a $2.5000 loss to trade at
$10.2000, PPC  was down $0.4406 to $1.7894 and INNSCOR traded $0.2865 lower
at $2.1460. DELTA  also dropped $0.1234 to end at $4.2401 and OK ZIMBABWE
lost $0.0890 to $0.3565.

 

Losses were partially offset by gains in SEEDCO INTERNATIONAL  which added
$0.1450 to $0.8750, ZIMPLOW  recovered $0.0445 to settle at $0.2670 and
NAMPAK   was up by $0.0360 to $0.2160. FIRST CAPITAL BANK   also increased
by $0.0124 to $0.0750 and UNIFREIGHT was $0.0060 stronger at $0.0420.

 <mailto:info at bulls.co.zw> 

 

 

  Global Currencies & Equity Markets

 

South Africa

 

South African rand rallies as Moody's seen holding fire, stocks rebound

(Reuters) - South Africa’s rand continued to rally on Friday, lifted by a
deep Wall Street selloff and near unanimous bets that Moody’s will keep the
country’s credit rating at investment grade.

 

Stocks snapped a four-day losing streak to end the week positive, led by
market heavyweight Naspers.

 

At 1530 GMT the rand was 1.25 percent firmer at 14.4525 per dollar, posting
a fresh one-week best as emerging markets overall benefited from a revival
in risk appetite after the two-day slide on Wall Street.

 

Markets are also widely expecting Moody’s to keep Pretoria’s foreign
currency rating unchanged and are awaiting the mid-term budget (MTBPS) to be
delivered by new Finance Minister Tito Mboweni on Oct. 24.

 

In March Moody’s affirmed South Africa’s investment-grade credit rating and
revised its outlook to stable from negative. Last month the agency said
there was little chance it would cut the country to ‘junk’ this year.

 

Bonds were also firmer, with the yield on the benchmark government bond due
in 2026 down 2 basis points to 9.245 percent.

 

In the equities market, the All-Share index was 2.38 percent firmer at
53,473 points while the blue chip Top-40 index climbed 2.65 percent to
47,273 points.

 

Global markets recovered on Friday after the aggressive sell-off led by Wall
Street.

 

Naspers led the Top-40 index, rising 8.46 percent to 2,908 rand. Hong Kong’s
Tencent Holdings, in which Naspers has a 31.2 percent shareholding, closed 8
percent higher. Banks rose 3.32 percent.

 

On the technical front, Thursday’s sell-off drove the local market deep into
oversold territory.

 

South Africa’s biggest food producer Tiger Brands said on Friday it had
re-opened a facility that was closed after it was implicated in the world’s
largest outbreak of listeria which killed more that 200 people.

 

Shares in the food producer closed 3.96 percent higher.

 

 

 

Kenya

 

Kenyan shilling firms amid excess liquidity in money markets

(Reuters) - The Kenyan shilling firmed against the dollar on Friday
supported by diaspora remittances and slow importer demand countering excess
liquidity in local money markets, traders said. 

 

At 0912 GMT, commercial banks quoted the shilling at 100.70/90 per dollar,
compared with 100.80/101.00 at Thursday's close. 

 

The daily interbank lending rate was quoted at 3.3884 percent on Thursday,
down from 3.4630 percent during the previous session. 

 

       <mailto:info at bulls.co.zw> 

 

 

 

 

Asia

 

Asian shares resume decline, Saudi tensions lift oil prices

(Reuters) - Asian shares slipped on Monday as worries over Sino-U.S. trade
disputes, a possible slowdown in the Chinese economy and higher U.S.
borrowing costs tempered optimism despite a rebound in global equities late
last week.

 

Spreadbetters expected European stocks to open mixed, with Britain’s FTSE
edging up 0.15 percent, Germany’s DAX dipping 0.1 percent and France’s CAC
losing 0.3 percent.

 

Not helping the mood, oil prices jumped and Saudi Arabian shares tumbled on
rising diplomatic tensions between Riyadh and the West after the monarchy
warned against threats to punish it over disappearance of a journalist
critical of its policies.

 

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1 percent
while Shanghai shares were down 0.75 percent.

 

Japan’s Nikkei slumped 1.8 percent, with carmaker shares hitting 13-month
lows after Washington said it would seek a provision about currency
manipulation in future trade deals with Japan.

 

MSCI’s broadest gauge of the world’s stock markets was off 0.25 percent
after a sizable 3.87 percent decline last week - its biggest since March -
to a one-year nadir.

 

The market shakeout has been blamed on a series of factors, including
worries about the impact of a U.S.-China trade war, a spike in U.S. bond
yields and caution ahead of the earnings season.

 

Although selling appeared to have abated on Friday, partly after Chinese
trade data showed strong growth in September, many investors remained
cautious.

 

Fujito said the trade war is starting to take a toll on growth in China,
noting that data released later on Friday showed Chinese auto sales posted
the biggest drop in seven years.

 

Over the weekend, China central bank governor Yi Gang said he still sees
plenty of room for adjustment in interest rates and the reserve requirement
ratio (RRR), as downside risks from trade tensions with the United States
remain significant.

 

Also starting to attract wider attention, Saudi Arabia doubled down on
pressure from the West on the disappearance of Jamal Khashoggi, a U.S.
resident and Washington Post columnist, after he entered the Saudi consulate
in Istanbul on Oct. 2.

 

U.S. President Donald Trump has threatened “severe punishment” if it turns
out Khashoggi was killed while many company executives have cancelled their
plans to attend a Saudi investor conference later this month.

 

Investors suspect the latest development could undermine the leadership of
Crown Prince Mohammed bin Salman and has the risk of eventually
destabilising the oil-rich kingdom.

 

Saudi Arabia’s shares plunged as much as 7 percent on Sunday, and closed
down 3.5 percent at their lowest levels since early January.

 

Oil prices reversed their downtrend since early this month.

 

Brent crude futures rose 1.3 percent to $81.50 per barrel, bouncing back
from Friday’s near-three-week low of $79.23.

 

Higher oil prices could boost inflation around the world and spark rises in
U.S. borrowing costs, which are also seen hurting weak borrowers, especially
those in emerging markets.

 

Although the U.S. 10-year yield posted its first major fall in about two
months last week on stock market rout, the yield rose a tad on Monday to
3.15 percent.

 

Investors were also bracing for a European Union summit meeting from
Wednesday.

 

The British pound shed 0.3 percent to $1.3114 after negotiators from the
European Union and the UK failed to clinch a Brexit deal ahead of the
crucial summit.

 

The euro traded at $1.1552, down slightly after Chancellor Angela Merkel’s
Bavarian allies suffered their worst election result since 1950 on Sunday.

 

On the other hand, the dollar is seen under pressure against the yen after
U.S. Treasury Secretary Steven Mnuchin said on Saturday that Washington
wants to include a provision to deter currency manipulation in future trade
deals, including with Japan.

 

That raised worried among Japanese policy circles that this would give
Washington the right to label as currency manipulation any future foreign
exchange market interventions by Tokyo to keep sharp yen rises in check.

 

The dollar slipped 0.2 percent to 112.00 yen. 

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

Commodities Markets

 

 

 

Week metals puzzle is how to trade a trade war: Andy Home

(Reuters) - Donald Trump didn’t make it to LME Week, the annual jamboree of
the global metals trading community.

 

But the U.S. president was the hot topic at the myriad seminars, cocktail
parties and private meetings across London this week.

 

The industrial metals traded on the London Metal Exchange (LME) have found
themselves at the heart of the escalating trade tensions between the United
States and China.

 

Physical supply chains have been stressed by tariffs and, in the case of
aluminum, by U.S. sanctions against Russian producer Rusal.

 

Futures prices have been rocked by waves of speculative selling since the
first round of trade tariffs was announced in June.

 

The tension between macro doom and micro strength in markets such as copper
has become extreme.

 

Chile’s mining minister, Baldo Prokurica, summed up the views of many this
week when he said: “Were it not for the trade war between the U.S. and
China, we would have a much higher copper price.”

 

The trade war, however, cannot be wished away. Indeed, it shows every sign
of intensifying in the short term.

 

The big question for the metals industry coming out of this year’s LME Week
is how to trade that war.

 

PHYSICAL SUPPLY CHAINS SHOCKED BUT ADAPTING

 

The aluminium market has been weaponised this year, creating chaos in a
traditionally super-efficient physical supply chain.

 

April’s U.S. sanctions against Oleg Deripaska and his Rusal empire
ricocheted in multiple unexpected ways, at one stage threatening the closure
of Western European smelters.

 

Aluminium along with steel was then used to fire the opening salvo in the
trade war as the United States imposed 10-percent import tariffs on national
security grounds.

 

 

China’s first retaliatory response included a 25-percent tariff on imports
of aluminium scrap from the United States.

 

That, according to CRU’s Greg Wittbecker, speaking at the research house’s
Tuesday seminar, has “killed” the flow of scrap between the two countries.

 

China imported 620,000 tonnes of U.S. material last year.

 

The back-up effect in the United States has been a collapse in the value of
scrap relative to primary aluminium, according to Wittbecker. If you’re in
the automotive scrap business, you’re trading like it’s the Global Financial
Crisis of 2008-2009.

 

The scrap link in the aluminium supply chain is partly broken. Other parts
of the chain are rapidly shifting shape as buyers collectively de-risk and
rethink security of supply.

 

Everybody expects the sanctions against Rusal to be lifted some time between
the U.S. mid-term elections on Nov. 6 and the extended deadline of Nov. 12.
The aluminium price certainly thinks so. At a current $2,040 per tonne, it
is almost exactly where it was before sanctions sent it rocketing to a
7-year high of $2,718.

 

However, the removal of sanctions will not change the hostile political
landscape between the United States and Russia. Russian aluminium carries a
new political risk going forwards.

 

Which is why Japanese buyers have been turning away from Russia towards
India this year, imports from that country doubling in the first eight
months.

 

And why Rusal itself is looking to expand its sales and marketing presence
in China.

 

It’s not just the aluminium supply change that is having to adapt to the new
reality of politicised markets.

 

Chile’s Codelco, the world’s largest copper producer, and China’s
state-owned Minmetals, are looking to transform their current annual supply
contract to a rolling three-year “evergreen” arrangement.

 

Supply security concerns are combining with the metals industry’s growing
focus on sustainability to change physical producer-buyer relationships.

 

FUNDAMENTALS FIGHT-BACK?

 

In the metals futures market the trade war impact has come in the form of
waves of fund selling.

 

The LME base metals have been trapped in a bear tariff narrative of dollar
strength and weakened growth in China, a double-whammy of bad news for the
likes of copper.

 

The LME base metals index slumped by 19 percent between June and September.

 

It has since stabilised and just about every metals analyst thinks the
sell-off has gone too far and it is time for a fundamentals fight-back.

 

Zinc, agreed Macquarie Capital’s Vivienne Lloyd, “has been beaten up the
most” but “we like it nearby – it’s a really tight metal situation.”

 

And everyone still likes nickel, even if it has lost some of its recent
electric-vehicle lustre as it too has succumbed to the broader sell-off.

 

This tension between robust internal supply-demand dynamics and investors’
negative view of base metals in the current tariff climate is currently
playing out in LME time-spread tightness.

 

There are backwardations in the LME copper, lead and zinc markets right now
with aluminium trading at a pinched contango.

 

TRADING THE TRADE WAR

 

However, if this LME Week’s mood has been cautiously upbeat for metal
prices, Wednesday’s spill-over sell-off from collapsing stock markets was a
chill reminder of the darkening storm clouds ahead.

 

The metals markets can take comfort from the current robust fundamentals and
the promise of more to come from China’s use of infrastructure investment to
cushion the impact of U.S. tariffs.

 

But this will be no re-run of the boom of 2008-2009. China is still
deleveraging from that bonanza. This version will be more targeted and less
ambitious, a stabilisation exercise.

 

Together with ominous signs of a slowdown in global growth , the cautiously
bullish timeline runs out around the middle of next year. After then
JPMorgan’s view would be “to get out of risk markets”.

 

Moreover, no-one’s holding out for a quick resolution of the trade war.

 

If it were just about trade, China’s ready to do a deal, in the opinion of
Charles Li, chief executive of the LME’s owner, Hong Kong Exchanges and
Clearing.

 

But “the America we thought we were talking to is not the same America that
is now talking to us”.

 

This is no “classic trade war”, James Kynge of “The Financial Times” told
the same LME Seminar, but rather “a strategic rivalry across many fronts.”
And one that is only going to intensify, in his opinion.

 

There were few in London this week, including the many Chinese visitors, who
would disagree.

 

Learning how to trade the trade war has only just begun for the metals
sector. 

 

 

 


 

INVESTORS DIARY 2018

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 


 

 

 

 


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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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