Bulls n Bears Daily Market Commentary : 20 February 2019

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Bulls n Bears Daily Market Commentary : 20 February 2019

 


 

 


 <mailto:info at bulls.co.zw> 

 


 

 


Zimbabwe Stock Exchange Update

 

Market Turnover $5,977,036.83 with foreign buys at $3,284,614.92 and foreign
sales were $585,798.90. Total trades were 143.

 

The All Share index went up by a marginal 0.03 points to close at 152.25
points. DELTA gained $0.0159 to $2.9112, OK ZIMBABWE  increased by $0.0066
to close at $0.2800 and OLD MUTUAL LIMITED  traded $0.0038 stronger at
$9.2038. SEEDCO moved up by $0.0034 to settle at $1.9784.

 

Trading in the negative was SIMBISA  which lost $0.0125 to end at $0.7475,
SEEDCO INTERNATIONAL LIMITED  dropped $0.0084 to $1.7500 and CASSAVA
SMARTECH traded $0.0046 lower at $1.4504. ECONET   also decreased by $0.0029
to $1.4600 and PADENGA  was $0.0001 down to $1.0600.

 <mailto:info at bulls.co.zw> 

 

 

  Global Currencies & Equity Markets

 

 

 

Zimbabwe

 

Zimbabwe scraps bond-note dollar peg, paves way for exchange rate slide

(Reuters) - Zimbabwe scrapped the peg between its quasi-currency bond note
and the U.S dollar on Wednesday, its central bank governor said, potentially
paving the way for its official currency exchange rate to slide sharply to
match its value on the streets.

 

Central Bank Governor John Mangudya said the surrogate bond notes and
electronic dollars known as Real Time Gross Settlement (RTGS) would trade in
a managed float against the U.S. dollar and other foreign currencies in a
new foreign exchange interbank market launched on Wednesday.

 

Mangudya said bond notes and electronic dollars will be called RTGS dollars
(RTGS$), in effect becoming Zimbabwe’s currency of trade.

 

The main opposition said the government had re-introduced the Zimbabwean
dollar through the back door but without the fundamentals needed to support
a new currency. The finance minister has said a new currency will come
within 12 months.

 

“Regrettably the economy now enters another period of self induced shocks
that will see salaries being devalued, hyperinflation, shortages and
queues,” Tendai Biti, a former finance minister and senior opposition
official, tweeted.

 

Many Zimbabweans had long expected the move after the bond note started
losing value on the black market.

 

When bond notes were introduced in November 2016, Mangudya said they were
guaranteed by an African Export and Import Bank loan and that anyone could
exchange the surrogate currency at par with dollars.

 

Zimbabwe adopted the U.S. dollar after dumping its hyperinflation-hit
currency in 2009. It has recently been struggling with a shortage of cash
dollars, leading to prices on imported goods spiraling in the last few
weeks.

 

A sharp increase in the price of fuel together with broader economic
difficulties last month led to violent protests that were met by a brutal
security crackdown.

 

Mangudya said several currencies like sterling and South Africa’s rand will
remain in use and that importers would buy dollars at rates set by the
interbank market.

 

Businesses and miners have been lobbying the central bank since last year to
float bond notes and RTGS$.

 

Zimbabwe has maintained a one-to-one pegged exchange rate between bond
notes, first launched in 2016, and the dollar even though the greenback and
other foreign currencies have fetched high premiums when exchanged for the
notes. The bond notes are used for day-to-day transactions in the shops and
elsewhere.

 

Harare-based economist Ashok Chakravarti said businesses that bought dollars
on the black market were charging higher prices, fanning inflation, which
reached 57 percent in January.

 

On Wednesday, $1 fetched up to 3.50 bond notes on the street and more for
RTGS dollars.

 

 

Uganda

 

Ugandan shilling holds steady due to sluggish demand for dollars

(Reuters) - The Ugandan shilling        was stable on Thursday as demand for
hard currency from goods importers and commercial banks waned. 

 

At 0937 GMT, commercial banks quoted the shilling at 3,665/3,675, unchanged
from Wednesday's closing rate.

 

       <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
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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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