Bulls n Bears Daily Market Commentary : 26 July 2019

Mon Jul 29 02:16:26 CAT 2019

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Bulls n Bears Daily Market Commentary : 26 July 2019

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Zimbabwe Stock Exchange Update

Market Turnover ZWL$ 3,142,904.07 with foreign buys at ZWL$ 569,318.00 and
foreign sales were NIL Total trades were 105.

The All Share index retreated by 0.47 points to close at 190.50 points.
CASSAVA SMARTECH ZIMBABWE LIMITED lost $0.0336 ending at $1.6043, OK
ZIMBABWE LIMITED retreated by $0.0076 to close at $0.4219 and SIMBISA BRANDS
LIMITED  traded $0.0025 lower at $1.0375. PADENGA HOLDINGS LIMITED also
decreased by $0.0025 to end at $1.8975 and SEEDCO INTERNATIONAL LIMITED lost
$0.0003 ending at $2.1222.

The losses were offset by gains in MEIKLES LIMITED which advanced by $0.0500
to $1.3000, OLD MUTUAL LIMITED added $0.0158 to close at $16.0658 and ECONET
WIRELESS ZIMBABWE LIMITED  was $0.0141 higher at $1.6964. BINDURA gained
$0.0025 to settle at $0.1025 and PPC LIMITED traded $0.0024 higher at
$1.9500.

 <mailto:info at bulls.co.zw> 

  Global Currencies & Equity Markets

South  Africa

South Africa's rand, bonds tumble as Moody's and Fitch warn of Eskom risk

(Reuters) - South Africa’s rand tumbled to its weakest level in three weeks
on Friday, while the yield on debt issued by the government and the power
utility Eskom shot up as the risk grew of a credit downgrade to junk status
by year-end.

At 1600 GMT, the rand was 1.24% weaker at 14.2650 per dollar, bringing its
weekly losses to more than 3%. Almost half of that came after the ratings
firm Moody’s delivered a warning about the government’s 59 billion rand ($4
billion) bailout for Eskom.

Fitch added to the negative news, trimming its outlook to negative from
stable while retaining its BB+ rating, saying bailouts to state firms along
with weak economic growth would push up the budget deficit and put added
strain on state spending.

Finance Minister Tito Mboweni announced plans to give Eskom the extra cash
on Tuesday, but warned of lower-than-expected tax revenues and higher public
debt levels as a consequence. He did not give any definite detail on the
promise to break up Eskom into three individual parts.

The risk premium, or yield, on Eskom bonds had fallen steadily since the end
of May as the power cuts that it had been imposing earlier in the year
eased, drawing mainly offshore investors looking to take advantage of
returns often higher than for government paper.

On Friday, the yield on government dollar bonds rose to its highest level in
more than a month, and the yield on Eskom’s 2033 dollar bond rose to its
highest since February.

Government bonds mirrored the upturn in risk and souring demand, with the
yield on the benchmark 10-year paper climbing 18 basis points to 8.54%, its
highest since June 18.

The South African Reserve Bank (SARB) cut lending rates last week but cooled
expectations of further reductions, and on Friday emphasised its preference
for caution.

Stocks traded sideways as Eskom’s woes chipped away at appetite for domestic
equities.

The benchmark JSE Top-40 Index dipped 0.08% to 51,523 points while the
broader All-Share Index was also down 0.08% at 57,616 points.

The banking sector, typically sensitive to the local economy and currency
fluctuations, fell 1.26%, while general retailers fell 1.21%.

($1 = 14.2559 rand) 

Nigeria

Nigeria's central bank extends cheap credit to milk producers after FX ban

(Reuters) - Nigeria’s central bank plans to extend a low-interest loan offer
to local milk producers to discourage imports after it curbed access to
forex for the sector.

The bank said in a statement that it had met with milk importers, after the
currency restriction was announced this week, to offer them cheap credit to
try and boost output locally instead of relying on “endless” imports.

Keen to reduce imports of products that can be produced locally and to
conserve dollar reserves, the bank has also offered cheap credit to rice,
tomato and starch importers for the same purpose.

Nigeria spends more than $1 billion per annum on milk imports.

President Muhammadu Buhari has made diversifying the economy away from oil a
central policy, but a recent recession has slowed plans, slashed government
revenues and triggered a series of currency devaluations.

The government is seeking to revive the economy, but lending to businesses
has been flat, prompting the central bank to announce a series of policies
aimed at forcing banks to give credit to help jump start the economy.

Interest rates in Nigeria have been stuck at double digits as the central
bank struggles to curb inflation, support the naira currency and keep bond
yields high to attract foreign investors.

But it has been offering subsidised credit to specific sectors such as
agriculture and manufacturing while maintaining benchmark rates high at
13.5%.

Nigeria relies on imports for most of what its 180 million population
consumes. In 2015, the central bank restricted access to forex for 41 items
which it said can be produced in Nigeria.

The central bank said the idea to add milk to the forex restriction list
arose from the success of the currency restriction policy and the large
amount spent on imports.  

       <mailto:info at bulls.co.zw> 

America

Trump adviser says currency intervention off the table; Trump less clear

(Reuters) - The Trump administration has “ruled out” intervening in markets
to lower the U.S. dollar’s value, even though President Donald Trump is
concerned other countries are weakening their currencies to gain a trade
advantage, a top White House adviser said on Friday.

White House adviser Peter Navarro, a trade hard-liner, presented Trump on
Tuesday with ideas on how to devalue the dollar as a way to pressure China
in an ongoing trade fight, according to a source familiar with the matter,
confirming a Politico report, which said the president quickly dismissed the
proposals.

Asked why he had decided not to act on them, Trump told reporters at the
White House, “I didn’t say I’m not going to do something.”

Trump has publicly complained about the strength of the dollar, saying it
hurts American competitiveness, but Kudlow disputed an assertion that the
president wanted a weaker greenback. Rather, he said, other currencies
should be stronger.

Kudlow told reporters later on Friday that the president wanted a steady
dollar.

Trump, in his remarks to reporters, suggested he welcomed the dollar’s
strength in so far as it is an emblem of a strong economy, even though it
curbs U.S. exports.

In a tweet on Monday, Trump complained that it was “very unfair that other
countries manipulate their currencies.” He has blamed the U.S. Federal
Reserve’s interest rate policy for much of the dollar’s strength and has
been jawboning the central bank to cut rates at its two-day meeting next
week.

The central bank had been raising rates through the end of last year, and
the substantial gap between U.S. borrowing costs and those in other
developed economies has been seen as a contributor to the dollar’s strength.
But, in response partly to what it sees as headwinds from Trump’s trade
policies, the Fed is now expected to cut rates for the first time in more
than a decade.

In the last 12 months, the ICE U.S. dollar index has gained about 3.5%,
largely due to gains against the euro. On Friday, the index touched the
highest in two months and was less than 0.5% from its strongest levels in
more than two years.

Against China’s yuan, it has risen by about 1.4% over the last 12 months,
much of that coming in May after Trump raised tariff rates on billions of
dollars of Chinese imports.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Europe's central banks ditch 20-year-old gold sales agreement

(Reuters) - European central banks have ditched a 20-year-old agreement to
coordinate their gold sales, saying they have no plans to sell large amounts
of the metal, the European Central Bank (ECB) said on Friday.

The Central Bank Gold Agreement (CBGA) was originally signed in 1999 to
limit gold sales and help stabilise the market for the precious metal.

Through the 1990s, sporadic sales often conducted behind closed doors by
European central banks, which hold some of the world’s largest gold hoards,
drove down prices and undermined the metal’s status as a stable reserve
asset.

The deal, originally between 15 central banks, capped the amount signatories
could sell each year, stabilising the market.

Over the next two decades prices surged, from less than $300 an ounce to a
high of almost $2,000 in 2011, while central banks switched from being net
sellers of gold to net buyers.

In a sign of the change in the market, the price of gold, currently around
$1,400 an ounce, barely budged after the announcement.

The agreement was updated three times and eventually expanded to include 22
central banks, though in 2014 - three years after the last significant gold
selling by those covered by the pact - the cap on sales was lifted.

The latest version of the deal was due to expire on Sept 26.

She said the market had transformed since 1999 and was now more liquid and
more stable.

Central banks bought 651 tonnes of gold worth nearly $30 billion last year,
according to World Gold Council figures - the most in half a century.

Larger European central banks have not started buying gold, but purchases by
Poland and Hungary turned the continent into a net buyer. 

.

INVESTORS DIARY 2019

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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