Bulls n Bears Daily Market Commentary : 19 February 2019

Wed Feb 20 06:05:39 CAT 2019

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Bulls n Bears Daily Market Commentary : 19 February 2019

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Zimbabwe Stock Exchange Update

Market Turnover $222,455,920.41 with foreign buys at $218,541,979.80 and
foreign sales were $219,131,173.74. Total trades were 73.

The All Share index recovered 1.01 points  to close at 152.22 points. DELTA
led the movers with a $0.1403 gain to close at $2.8953 and MEIKLES added
$0.0350 to settle at $0.5550. CASSAVA SMARTECH  and MASIMBA both increased
by $0.0050 to close at $1.4550 and $0.0850 respectively. WILLDALE   traded
$0.0023 stronger at $0.0144.

Gains were partially offset by losses in PADENGA  which lost $0.0399 to end
at $1.0601, ECONET  dropped $0.0315 to $1.4629 and SEEDCO  was $0.0250 down
at $1.9750. HIPPO VALLEY ESTATES  also decreased by $0.0097 to $1.7500
whilst OLD MUTUAL LIMITED  retreated by $0.0062 to $9.2000.

ECONET AND CASSAVA BLOCK TRADES

Today Econet Wireless Zimbabwe Limited and Cassava SmarTech Zimbabwe Limited
traded 81,072,230 and 66,297,270 shares respectively. These trades were
executed by one material shareholder who was reallocating shares between two
portfolios owned by the same shareholder. No cash exchanged hands in the
transaction.  The trades were done at $1.4775, as a negotiated deal, which
was specifically approved by the Zimbabwe Stock Exchange in line with the
requirements of the Zimbabwe Stock Exchange Listings Rules.

 <mailto:info at bulls.co.zw> 

  Global Currencies & Equity Markets

South Africa

South Africa's rand tepid ahead of annual budget speech

(Reuters) - South Africa’s rand inched lower on Tuesday, with investors
pricing in domestic risks ahead of the annual budget where the financial
crisis at state power utility Eskom is set to be addressed.

At 1502 GMT, the rand was 0.09 percent weaker at 14.1475 per dollar,
compared with its overnight close of 14.1350 in New York.

The rand has tumbled more than 6 percent since ailing power supplier Eskom
resumed nationwide electricity blackouts last Monday over technical issues
at its creaking fleet of coal-fired plants.

Most of Eskom’s debt of about 420 billion rand ($30 billion) is under
government guarantee, a major risk to the country’s sovereign credit rating
which is ranked at junk status by two of the top three ratings firms.

Eskom expects to make annual losses of around 20 billion rand this year, and
Finance Minister Tito Mboweni is set to announce a bailout for the firm
during his budget speech on Wednesday in parliament.

Bond prices rose. The yield on the benchmark 2026 paper edged lower to 8.87
percent, from Monday’s close of 8.855 percent.

On the bourse, stocks struggled to stay positive after a buoyant start to
the week, along with emerging market peers as investors awaited outcomes
from the U.S.-China trade talks to be held in Washington this week.

Weak company results and profit warnings also contributed to the weakness.

The Johannesburg All-share index closed 0.12 percent weaker to 55,194
points, while the Top-40 index weakened 0.13 percent to 48,956 points.

EOH Holdings topped the decliners, plunging 16.37 percent at 14.61 rand
after a report by Tech Central news site that Microsoft’s decision to cut
ties with the technology company was linked to a tip-off about a contract
with South Africa’s defence department.

Reuters has not verified the news site’s story. EOH said it could not
respond each time the media published information but shareholders would be
provided with responses to relevant media coverage as appropriate, subject
to legal advice.

It said the Microsoft investigation formed part of EOH’s larger
internally-initiated investigation into all public sector contracts over the
last five years, and urged shareholders to “exercise caution” when dealing
in the company’s securities until a further announcement.

EOH said last week Microsoft was terminating its channel partner agreement
with EOH’s subsidiary.

The operator of low-fare airline kulula.com and British Airways in South
Africa, Comair fell 0.17 percent to 5.74 rand after reporting a 38 percent
decline in half-year headline earnings per share.

While Kumba Iron Ore Ltd weakened 2.64 percent to 376.30 rand after
reporting lower full-year headline earnings per share, compared to 2017,
when the firm had benefited from the positive impact of an impairment
reversal. ($1 = 14.1343 rand)

Kenya

Kenyan shilling edges up against the dollar

(Reuters) - The Kenyan shilling inched up against the dollar on Monday as
offshore investors bought  government debt and Kenyans who live abroad sent
hard cash back home, traders said. 

At 1023 GMT, commercial banks quoted the shilling at 100.05/25 per dollar,
slightly up from Friday's close of 100.15/35. 

       <mailto:info at bulls.co.zw> 

Asia

Asia shares rally to 4-1/2-month peak on hopes of U.S.-China trade deal

(Reuters) - Asian stocks advanced to 4-1/2-month highs on Wednesday as
investors bet that Chinese and U.S. trade negotiators would be able to
secure a deal to de-escalate their year-long tariff war.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose nearly 1.0
percent to reach its highest levels since Oct. 2.

Hong Kong’s Hang Seng gained 1.1 percent to six-month highs, while Korea’s
Kospi and Taiwan’s index recovered to levels last seen in early October.
Japan’s Nikkei gained 0.75 percent to two-month highs.

Chinese shares rose 0.4 percent, extending their run of gains to 18 percent
from their Jan. 4 trough, thanks to inflows of foreign funds.

The gains in Asia topped those in Tuesday’s Wall Street session, where the
S&P 500 gained 0.15 percent, helped by upbeat results from Walmart. The
Nasdaq rose 0.19 percent, logging its seventh straight session of gains.

U.S. President Donald Trump said on Tuesday that trade talks with China were
going well and suggested he was open to pushing off the deadline to complete
negotiations, saying March 1 was not a “magical” date.

U.S. tariffs on $200 billion worth of Chinese imports are currently
scheduled to rise to 25 percent from 10 percent if no trade deal is reached
by March 1.

Investors now expect Trump to meet Chinese President Xi Jinping next month,
likely after China’s annual congress meeting starting from March 5, to
strike a deal, or secure a “memorandum of understanding.”

But he predicted China “will not back down on so-called structural issues.
The two countries may perhaps agree to set up a body to continue discussing
those issues. Markets are already in the middle of pricing in these things.”

The two countries started a new round of talks to resolve their trade war on
Tuesday, and sessions at a higher level are planned later this week, with
Chinese Vice Premier Liu He visiting Washington on Thursday and Friday.

BEHIND FED’S TURNAROUND

Investors are also looking to the release later on Wednesday of minutes from
the Federal Reserve’s January policy-setting meeting, where policymakers
effectively signalled no further rate hikes and possible tweaks to its
balance sheet normalisation.

New York Fed President John Williams told Reuters he was comfortable with
the level U.S. interest rates are at now and that he sees no need to raise
them again unless economic growth or inflation shifts to an unexpectedly
higher gear.

But he also suggested the balance sheet rolloff would continue at least into
next year at its current pace, dampening speculation that the Fed could end
the process this year.

In the currency market, the euro firmed to $1.1350, bouncing back from
Friday’s three-month low of $1.1234, on the back of improving risk
appetites. The dollar gained 0.2 percent to 110.80 yen, edging near
Thursday’s seven-week peak of 111.13.

The British pound soared to $1.3063 on Tuesday, gaining 1.09 percent, a move
some traders attributed to rising hopes Prime Minister Theresa May will make
progress in seeking changes to her Brexit deal with the European Union. It
last stood at $1.3070.

The Chinese yuan rose more than 0.5 percent to 6.7243 per dollar, its
highest level in about three weeks after Bloomberg reported on Tuesday that
the United States was seeking to secure a pledge from China that it will not
devalue its yuan currency as part of a trade deal.

The yuan’s strength also sparked bids for Asian currencies, with the Thai
baht hitting five-year highs.

Oil prices hovered near 2019 highs, supported by OPEC-led supply cuts and
U.S. sanctions on Iran and Venezuela, but further gains were capped by
soaring U.S. production and expectations of an economic slowdown.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.01 per
barrel, down 8 cents from their last settlement, but not far off their 2019
high of $56.33 reached earlier this week.

International Brent crude futures stood at $66.33 per barrel, having hit a
three-month high of $66.83 per barrel earlier this week.

Gold rose 0.4 percent to 10-month highs of $1,346.50, extending its rally
sparked in part by signs that the world’s central banks are turning dovish.

The yellow metal has also attracted safety bids on worries about Brexit,
said Tatsufumi Okoshi, senior commodity economist at Nomura Securities.

Palladium rose 1.4 percent to yet another record high, having risen about 19
percent so far this year, on expectations of increased demand due to
stricter emissions standards. 

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold prices hold at 10-month highs; markets await Fed minutes

(Reuters) - Gold prices held at 10-month highs on Wednesday, supported by
global slowdown concerns and a weaker dollar, with markets eyeing the
release of the U.S. Federal Reserve’s policy meeting minutes later in the
session.

FUNDAMENTALS

* Spot gold was marginally lower at $1,339.61 per ounce as of 0021 GMT,
having touched $1,341.78 per ounce in the previous session, its highest
level since April 20.

* U.S. gold futures dipped 0.2 percent to $1,342.6 an ounce.

* Palladium rose 0.3 percent to $1,484.00 per ounce, within striking
distance of $1,500 after it hit a record $1,485.50 on Tuesday on concerns
about a sharp supply deficit.

* The dollar index versus a basket of six major currencies was lower at
96.495 on increasing optimism for a breakthrough in the trade talks,
bolstering appeal for gold.

* U.S. President Donald Trump said on Tuesday that trade talks with China
were going well and suggested he was open to pushing off the deadline to
complete negotiations, saying March 1 was not a “magical” date.

* U.S. Federal Open Market Committee will release the minutes from its
January 29-30 policy meeting at 1900 GMT.

* Meanwhile, Trump said on Tuesday he wants North Korea to end its nuclear
program, but has no pressing time schedule for this, as he dispatched his
special envoy to finalize preparations for a second summit with North Korean
leader Kim Jong Un next week.

* British Prime Minister Theresa May will meet top EU official Jean-Claude
Juncker in Brussels on Wednesday, pressing on with efforts to find a way to
get their Brexit deal through Britain’s parliament.

* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund,
said its holdings fell 0.07 percent to 792.45 tonnes on Tuesday from 793.03
tonnes on Friday.

* South Africa’s AngloGold Ashanti said it was putting its interests in an
Argentine mine up for sale as it looks to focus on operations with a longer
shelf life and ability to deliver higher returns.

* South Africa’s Association of Mineworkers and Construction Union (AMCU)
called on its members at Sibanye-Stillwater’s platinum operations to embark
on a secondary strike over job cuts and wages.

* Peru on Tuesday launched a new, “sustained” effort to uproot illegal gold
mining in one of the Amazon’s most biodiverse corners, sending 1,500 police
and military officers to the region after deforestation from wildcat mining
hit a new high last year.

The United States' aluminium tariff wall is crumbling: Andy Home

(Reuters) - It is almost a year since the United States imposed duties on
imports of aluminium and steel on national security grounds.

If the aim of the so-called “Section 232” tariffs was to lift domestic
production, President Donald Trump’s administration can claim a degree of
success.

U.S. output of primary aluminium has started rising sharply thanks to
restarts of idled capacity, although not all of them have been directly down
to the 10-percent import tariff.

If, however, the aim was also to tackle rising import penetration,
particularly by Chinese aluminium producers, tariffs may already have passed
peak effectiveness.

Ever more gaps are appearing in the aluminium trade wall as the number of
exclusions granted for specific products lengthens.

China has been a major beneficiary of the exclusions process with approved
import tonnages not far off actual volumes in 2017.

It has fared considerably better than Canada, long-standing U.S. ally and a
strategic supplier of aluminium to its neighbour.

Hardly any Canadian metal has been excluded from the tariffs, which is why
the country’s Foreign Minister Chrystia Freeland is lobbying hard for a full
exemption.

So runs the law of unintended consequences but it also highlights the
limited effectiveness of tariffs if, like the United States, you are heavily
import dependent.

PRODUCTION RISING

The Commerce Department’s January 2018 report recommending action on
aluminium imports explicitly targeted lifting domestic production capacity
utilisation from 39 percent in 2017 to 80 percent.

By the end of last year U.S. primary aluminium output was running at an
annualised rate of 1.15 million tonnes, equivalent to 63 percent of domestic
capacity, according to figures from the Aluminum Association.

It should rise further as Century Aluminum reactivates a third idled line at
its Hawesville smelter in Kentucky. The first line kicked back into life in
the third quarter and the second was due by the end of last year.

Century is one of three companies actively rekindling U.S. production.

Magnitude 7 Metals has resumed operations at the New Madrid smelter in
Missouri. The import tariff has certainly helped but the restart plans were
underway as soon as the plant was bought in 2016.

Similarly, Alcoa’s restart of idled capacity at its Warrick smelter in
Indiana was announced at the end of 2017, before Commerce had submitted its
report, and was driven, the company has since stressed, by plant-specific
economics not tariffs.

It remains to be seen how much more dormant capacity can be coaxed back into
life because the economics of smelting aluminium remain challenging.

Alcoa reported a Q4 2018 operating loss in its aluminium segment and the
price of the metal has sunk further since then. Trading at $1,860 per tonne
on the London Metal Exchange Tuesday morning, aluminium has failed to bounce
much from January’s one-year low of $1,785.50.

Ask just about any analyst what’s going on with the bombed-out price and
you’ll be pointed in the same direction.

China’s exports, mainly of aluminium in semi-manufactured product form
(“semis”), surged 21 percent to 5.8 million tonnes last year.

They jumped again to 552,000 tonnes in January, the growth rate accelerating
to 26 percent.

RISING EXCLUSIONS

China has for several years been the dominant source of U.S. imports of
aluminium “semis”.

There are anecdotal reports that Chinese exporters are shipping more to
other Asian countries and less to the United States, partly due to
antidumping duties on specific products and partly due to the broader
U.S.-China trade tensions.

Yet, any “Section 232” barriers to Chinese imports are rapidly
disintegrating.

The U.S. Commerce Department had approved 108 exclusion requests for Chinese
aluminium as of Dec. 18, according to a study by the Mercatus Center at
George Mason University.

Such a request is granted if the applicant can demonstrate that there is no
domestic source of a specific product.

The nominal tonnage excluded totals 550,000 tonnes, compared with actual
Chinese imports of 641,000 tonnes in 2017.

There are another 590 exclusion requests for Chinese products pending.

Canada, by contrast, has garnered just 3 exclusions, covering less than
5,000 tonnes, although there were 935 requests still pending as of
mid-December.

The comparison between the fortunes of the United States’ two biggest
aluminium suppliers is slightly misleading but still instructive.

Canada has historically been the dominant supplier of primary aluminium to
the United States, although it ships “semis” as well.

It’s hard to argue that metal in this raw form can’t be sourced
domestically. The second and third largest suppliers of primary aluminium in
2017 were Russia and the United Arab Emirates and neither has received any
exclusions either.

China doesn’t export that sort of aluminium but rather a broad spectrum of
“semis”, including, evidently, many that can’t be sourced in the domestic
market.

It shouldn’t be surprising that the exclusion mechanism favours product over
metal.

But it does expose the limitations of tariffs when the U.S. remains so
dependent on imports.

That includes primary metal. Even if all the idled capacity in the country
were restarted, the United States could still meet less than half of its
primary needs, according to the Aluminum Association.

PEAK EFFECTIVENESS

There were just over 6,200 aluminium exclusion requests pending as of Dec.
18, according to the Mercatus Center. The Commerce Department is also having
to deal with 30,000 requests for exclusion from the steel tariffs.

Each one represents another potential hole in President Donald Trump’s
aluminium wall.

True, domestic production is creaking back into life but the 10 percent
tariff can provide only limited cushioning for U.S. smelters as the price
deteriorates.

The reason these plants were mothballed in the first place was because of
their higher cost structures.

Tariffs may already be close to, if not past, peak effectiveness from the
administration’s stated national security perspective.

What happens next then?

Aluminium associations the world over are calling for a refocus on China’s
massive production and export capacity.

The OECD has provided them with ammunition by concluding in a recent report
that “market distortions appear to be a genuine concern in the aluminium
industry”. It cited in particular China and the Gulf Cooperation Countries.
(“Measuring distortions in international markets: the aluminium value
chain”, January 2019)

Maybe the U.S. administration is going it alone and aluminium is part of the
broader trade talks about Chinese subsidies.

If it wanted, though, it would find plenty of allies for a multilateral push
for reform of the Chinese aluminium sector.

Mind you, it would probably have to start by making peace with the
Canadians.

INVESTORS DIARY 2019

Company

Event

Venue

Date & Time

Zimbabwe

Robert Mugabe National Youth Day

Zimbabwe

21 Feb 2019

Powerspeed

AGM

Boardroom, Gate 1, Powerspeed Complex, Graniteside

28 Feb 2019 - 11am

Zimbabwe 

Independence Day

Zimbabwe

18 Apr 2019 

Good Friday

19 Apr 2019

Easter Saturday

20 Apr 2019

Easter Sunday

21 Apr 2019

Easter Monday

22 Apr 2019

Workers Day

01 May  2019

Africa Day

25 May 2019

 <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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