Bulls n Bears Daily Market Commentary : 24 October 2018

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Bulls n Bears Daily Market Commentary : 24 October 2018

 


 

 


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

 


 

 


Zimbabwe Stock Exchange Update

 

Market Turnover $2,534,833.69 with foreign buys at $516,850.52 and foreign
sales were $411,317.60. Total trades were 118.

 

The All Share index recovered 1.29 points  to close at 179.90 points. DELTA
led the movers with a $0.0885 gain to close at $3.4884, NMB  added $0.0364
to $0.2364 and ECONET   increased by $0.0352 to $2.4374. DAIRIBORD also
traded $0.0014 higher at $0.2137 and WILLDALE  was $0.0012 stronger at
$0.0072.

 

Trading in the negative was OLD MUTUAL LIMITED which went further down by
$0.3196 to $6.8349, SEEDCO  lost $0.1505 to settle at $2.3995 and ZIMRE
HOLDINGS (ZIMR.zw) was $0.0028 down at $0.0210. TURNALL  also decreased by
$0.0010 to $0.0500 and AXIA  traded $0.0009 lower at $0.4491.

 

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

 

 

  Global Currencies & Equity Markets

 

Uganda

 

Ugandan shilling unchanged amid a sell-off by commercial banks

(Reuters) - The Ugandan shilling        was unchanged on Wednesday , amid a
sell-off by some commercial banks as weak demand spurred them to pare their
excess dollar positions. 

 

At 0929 GMT, commercial banks quoted the shilling at 3,755/3,765, same level
as Tuesday's close. 

 

 

 

South Africa

 

South Africa's rand, bonds slump after budget disappoints

(Reuters) - South Africa’s rand fell more than 1 percent and bonds slid on
Wednesday after Finance Minister Tito Mboweni delivered a medium term budget
with wider deficit estimates and lower growth forecasts.

 

At 1533 GMT, the rand traded at 14.4975 versus the dollar, 1.65 percent
weaker on the day, compared to a close of 14.2625 in New York.

 

Government bonds were also weaker, with the yield on the benchmark
instrument due in 2026 up 6.5 basis points at 9.230 percent.

 

Mboweni earlier delivered a bleak maiden budget, raising the deficit
estimate for the 2018/19 fiscal year to 4 percent of GDP, while halving the
growth forecast for this year to 0.7 percent.

 

Investors remained skittish as Africa’s most industrialised economy
struggles with ballooning debt that risks pushing its sovereign credit
ratings deeper into “junk” territory.

 

Rating’s agency Moody’s is expected to update its assessment this week.
Moody’s is the last of the top three rating agencies to have Pretoria’s debt
at investment grade.

 

In equities, the all share index fell 0.57 percent to 50,877 points while
the blue chip top 40 index was 0.75 percent lower at 44,669 points.

 

Naspers fell 3.96 percent to 2,575 rand after Tencent Holdings, in which it
has a 31 percent shareholding, closed 0.75 percent lower on reports that
Chinese authorities has halted issuing gaming licences.

 

The gold index fell 1.45 percent as prices slipped on a firmer dollar.

 

       <mailto:info at bulls.co.zw> 

 

 

 

 

 

America

 

Stocks crumble as global growth, U.S. earnings fears spook markets

(Reuters) - Asian shares plunged on Thursday as hundreds of billions of
dollars haemorrhaged from global markets after a rout in tech stocks
inflicted the largest daily decline on Wall Street since 2011, wiping out
all its gains for the year.

 

Stock investors have become increasingly nervous about lofty equities
valuations, a likely peak in corporate earnings momentum, faster rate hikes
in the United States and an ongoing Sino-U.S. trade war that threatens to
hurt world growth.

 

MSCI’s broadest index of Asia-Pacific shares outside Japan has fallen more
than 18.5 percent so far this year after skidding almost 2 percent on
Thursday.

 

Japan’s Nikkei tumbled 3.3 percent to a six-month trough while Australian
shares hit a more than one-year low. Tokyo’s Topix index tumbled 3 percent,
evaporating more than $155 billion in market value.

 

Chinese shares were in the red too with the blue-chip SSE Composite index
plummeting 2.5 percent as fresh market-support measures by the Chinese
government failed to ease investor worries about high leverage and the
Sino-U.S. trade war.

 

Hong Kong’s Hang Seng index sank 2.2 percent.

 

Some analysts feel equity bears may be better off focusing outside the
United States, at least for now.

 

The return of the bears has already been more pronounced outside the United
States, according to data analysed by Reuters. In addition, a Bank of
America Merrill Lynch study recently found that 58 percent of the 2,767
stocks in MSCI’s global index are now in bear market territory.

 

Weak readings on manufacturing in Europe have added to angst over world
growth, as has a surprise slump in U.S. home sales, which suggested rising
mortgage rates were sapping demand for housing.

 

Adding to the air of tension, police intercepted suspected bombs mailed to
former U.S. President Barack Obama, Hillary Clinton and other high-profile
Democrats, as well as to CNN, in what New York officials branded an act of
terrorism.

 

The growing international pressure on Saudi Arabia over the death of
journalist Jamal Khashoggi also weighed on investor sentiment.

 

On the trade front, disappointing forecasts from industrial bellwether
Caterpillar weighed on Wall Street as the giant warned of rising costs due
to U.S. import tariffs.

 

The Nasdaq closed down 12.4 percent from its Aug. 29 record closing high,
falling 4.4 percent on Wednesday in its biggest one-day percentage decline
since Aug. 18, 2011. In dollar terms, the Nasdaq vaporised $524 billion in
market capitalisation overnight.

 

The Dow <.DJI > fell 2.41 percent and the S&P 500 lost 3.09 percent.

 

Also weighing on sentiment, Citi lowered its global growth forecast for both
2019 and 2020 by 0.1 percentage point each to 3.2 percent and 3 percent,
respectively, it said in a note Thursday, citing policy tightening by the
U.S. Federal Reserve.

 

CURRENCIES

In foreign exchange markets, client participation on both spot and options
was fairly light, Citi noted in a separate note.

 

Funds flowed to the U.S. dollar and Treasuries and out of the euro and the
British pound.

 

The euro shed 0.7 percent to $1.1397 and breached a major chart bulwark at
$1.1430. It was last up 0.2 percent at $1.1409.

 

Against a basket of currencies, the dollar eased from near a nine-week peak
to 96.267.

 

Sterling hit a seven-week trough $1.2865, having dropped 0.8 percent
overnight. It was last a shade higher at $1.2887.

 

The yen got the usual safe-haven bid, with the euro skidding to a two-month
low at 127.68 yen. Even the high-flying dollar eased to 112.08 yen.

 

Oil prices slipped amid concerns over global growth. Brent crude fell 52
cents to $75.65 a barrel, while U.S. crude dropped 53 cents to $66.29.

 

Spot gold was a tad firmer at $1,236.76 an ounce.

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

Commodities Markets

 

 

London copper slips to 2-week low after Wall Street rout

(Reuters) - London copper prices fell for a  third straight session on
Thursday, hitting a two-week low as the metal considered to be an economic
bellwether tracked a slump in global equity markets.

 

Copper has been losing ground on concerns of a slowdown in top metals
consumer China, which pledged to support illiquid private companies after
third-quarter GDP growth slowed to 6.5

percent, the lowest since 2009.

 

Import premiums in China SMM-CUYP-CN have fallen to $112.50 per tonne, the
lowest since Sept. 19, after hitting three-year highs of $120 a tonne late
last month.

 

 

    FUNDAMENTALS

 

* LME COPPER: Three-month copper on the London Metal Exchange slipped as
much a 1 percent to $6,115 a tonne, the lowest since Oct. 11, and was down
0.7 percent at $6,138.50

a tonne as of 0451 GMT.  

 

* SHFE COPPER: The most-traded December copper contract on the Shanghai
Futures Exchange was also down for a third day, falling as much as 1.5
percent to 49,360 yuan ($7,109.73) a tonne, its weakest since Sept. 21,
before trimming losses to 0.8 percent by the mid-session interval. 

 

* OTHER METALS: Shanghai nickel slumped as much as 2.8 percent to 100,160
yuan a tonne, the lowest since Sept. 12, before cutting losses to 1.1
percent, while lead and aluminium moved higher after drops in LME stocks on
Wednesday.

 

* COPPER: Freeport-McMoRan Inc on Wednesday reported market-beating results
as output and grades at its big Indonesian mine rose, but early share gains
turned negative as investors digested forecasts for the world's biggest
public copper miner. 

 

 

 

Zinc market tightness confounds bearish expectations: Andy Home

(Reuters) - The refined zinc market looks super tight.

 

London Metal Exchange zinc spreads are stressed, with the
cash-to-three-months premium CMZN0-3 hitting a one-year high of $63 per
tonne earlier this week.

 

LME stocks are low, at just 99,900 tonnes excluding metal earmarked for
physical load-out.

 

It’s the same story in Shanghai.

 

Shanghai Futures Exchange (ShFE) zinc spreads are also in backwardation,
while the premium for metal in bonded warehouses shot to multi-year highs in
September.

 

ShFE stocks have rebuilt slightly since the start of the month to 53,500
tonnes. But that’s still well short of the 160,000 tonnes that were there as
recently as April.

 

Not the sort of headline you’d expect in a market that is weighed down by
expectations of a looming supply surge.

 

Feast, however, has been postponed, leaving the physical supply chain hungry
for units.

 

The International Lead and Zinc Study Group (ILZSG) made some interesting
revisions to its supply-demand forecasts in its October assessment of the
zinc market.

 

The group increased its expected global supply deficit this year to 322,000
tonnes from the 263,000 tonnes forecast at its last meeting in April.

 

Trying to predict a market balance for an industrial metal such as zinc is a
hapless exercise, particularly given the statistical opacity of China, the
largest single influence on the calculations.

 

The deficit assessment is a function of many moveable inputs, some of them
known, some of them “known unknowns”.

 

The real takeaway is not the outright size of deficit but why the group has
increased its shortfall estimate.

 

This year’s expected mine production growth has been slashed to 2.0 percent
from April’s forecast of 5.1 percent.

 

China’s own mine output is now forecast to contract by 2.5 percent this
year. In April the ILZSG expected it to rise by 2.3 percent.

 

China’s usual “swing capacity”, the smaller operations that burst into life
during periods of elevated pricing, has failed to swing this time around,
even though the zinc price hit 11-year highs in the second quarter.

 

Environmental crackdown seems the most plausible explanation for the change
in Chinese supply dynamics.

 

Outside of China, meanwhile, the wave of new mines is only starting to
build.

 

That supply will hit the market next year, when the ILZSG is forecasting
global mine production to surge by 6.4 percent with refined output growth
accelerating from 1.4 percent to 3.0 percent.

 

Note, however, that the group is still expecting a small 72,000-tonne
refined metal deficit next year, presumably allowing for the time it takes
for higher mine output to travel down the production chain.

 

The supply surge, in other words, has been pushed back to 2019.

 

Physical tightness in the refined segment of the market, it seems, is not
going to go away any time soon, either in Shanghai or in London.

 

Graphic on Shanghai zinc stocks and physical premium:

 

tmsnrt.rs/2O4v8M1

 

SHANGHAI SPIKE

In early September the premium for zinc in Shanghai’s bonded warehouse zone
ZN-BMPBW-SMM nearly doubled to $300 per tonne over LME cash, according to
Shanghai Metal Market.

 

Visible stocks on the ShFE were depleted at under 30,000 tonnes both at the
start and end of September.

 

This squeeze on physical availability has coincided with a slide in China’s
own refined zinc production.

 

National output fell for a fourth straight month in September, the pace of
decline quickening to 10 percent, according to the National Bureau of
Statistics.

 

The official figures always come with a statistical health warning but the
trend of falling refined production tallies both with the ILZSG’s assessment
of lower domestic mine supply and with Chinese producers’ stated intention
to cut output in the face of compressed margins.

 

The spike in the Shanghai premium may have included an element of panic
buying ahead of the Golden Week national holiday but it’s noticeable that
the premium has fallen only as far as $200, matching its previous high in
2017.

 

It’s still signalling that China is short of zinc units.

 

LME zinc stocks and cash-to-three-months spread:

 

tmsnrt.rs/2Rew5Dp

 

LME HALL OF MIRRORS

Those units will come from the rest of the world. Unfortunately, we don’t
know how much because China hasn’t released detailed metals trade reports
since March.

 

And we don’t know how much there is to feed Chinese imports because most of
the inventory in the rest of the world is sitting away from the statistical
light in off-market storage.

 

What we do know is that a significant part of that inventory is located in
Antwerp and New Orleans, because those are the two LME locations that have
seen large amounts of zinc placed on to LME warrant this year.

 

Antwerp received 60,050 tonnes over a three-day period in April and another
19,100 tonnes on July 20.

 

New Orleans has seen sporadic inflows totalling 182,975 tonnes this year.

 

The appearance of so much zinc has played to the bear narrative. But in
truth it is no more than a hall-of-mirrors interplay of LME spreads, LME
warehouse economics and a good deal of warrant sifting as traders seek out
saleable units from what might well be very old metal.

 

Which is why what has “arrived” at both Antwerp and New Orleans hasn’t stuck
around for long.

 

The Belgian location is currently being cleared out after a mass
cancellation last week. There are 31,275 tonnes of zinc awaiting physical
load-out and just 200 tonnes of available stock.

 

In New Orleans, despite the merry-go-round of zinc between on- and
off-market storage, headline LME stocks are now down by 50,800 tonnes on the
start of the year.

 

Outside of these two locations, inflow into the LME storage system has been
a minimal 6,275 tonnes since January. Most of it has already departed.

 

Only two other locations now hold registered open tonnage - Rotterdam with
100 tonnes and Bilbao in Spain with 300 tonnes.

 

Appearances can be deceptive when it comes to LME stocks but the underlying
reality is that outside of rotational movement at Antwerp and particularly
New Orleans, there doesn’t seem to be much metal available even at recent
high cash premium levels.

 

The ILZSG’s October forecasts tell us why that shouldn’t be a big surprise.

 

Time-spreads in both London and Shanghai are a reality check on a bear
narrative that had run ahead of itself.

 

 


 

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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