Bulls n Bears Daily Market Commentary : 05 June 2019

Thu Jun 6 03:54:06 CAT 2019

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Bulls n Bears Daily Market Commentary : 05 June 2019

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Zimbabwe Stock Exchange Update

Market Turnover RTGS$ 32,325,842.96 with foreign buys at RTGS$ 1,438,919.50
and foreign sales were RTGS$ 9,388,112.41. Total trades were 286.

The All Share index gained 0.45 points to close at 190.21 points. PPC added
$0.3787 to close at $2.2775, SEEEDCO INTERNATIONAL LIMITED rose by $0.1025
to end at $1.6125 and CBZ was $0.0581 higher at $0.4692. MEIKLES  increased
by $0.0576 to $0.9226 and NATIONAL FOODS was $0.0300 firmer at $7.0300.

Trading in the negative; PADENGA  retreated by $0.1824 to $1.7676, OK
ZIMBABWE eased $0.0018 to $0.4982 and TURNALL   was $0.0008 lower at
$0.1030. ECONET also decreased by $0.0005 to $1.7443 and RTG was $0.0001
weaker at $0.0848.

.

 <mailto:info at bulls.co.zw> 

  Global Currencies & Equity Markets

South Africa

South Africa's rand slumps after GDP shocker, stocks up

(Reuters) - South Africa’s rand slumped on Tuesday after data showed the
worst quarterly economic contraction in a decade at the start of 2019, while
stocks gained.

The rand was also hammered by news that South Africa’s governing party has
agreed to expand the central bank’s mandate to include employment and growth
as well as inflation.

Investors are nervous about any changes that could curb the independence of
the South African Reserve Bank (SARB).

At 1530 GMT, the rand was 1.8% weaker at 14.7000 per dollar.

The statistics office said gross domestic product contracted a quarterly
3.2% in the first three months of 2019, lagging the 1.7% decline economists
had expected and showing President Cyril Ramaphosa’s growth drive is
struggling to gain traction.

Bonds also weakened, with the yield on the benchmark 10-year issue up 3
basis points to 8.45%.

In equities, stocks strengthened as the rand weakened on the poor GDP
numbers.

The broader All-Share index closed stronger 0.38% to 56,500 points, while
the blue-chip Top-40 index increased 0.48% to 50,452 points.

Leading the blue chips was luxury brand Richemont, which gained 5.57% to
112.74 rand, while mining company Gold Fields climbed 5.010% to 71.46 rand
on the back of a near three-month gold price peak. On the downside, banking
stocks took a hit slipping 3.83% to 94.45 rand. Standard Bank shed 4.21% to
193.97 rand, while Absa fell 4.210% to 165.99 rand.

The weak GDP numbers weighed quite heavily on the banks, although the
heavyweights were up, said Michele Sanpangelo, a portfolio manager at
Independent Securities.

Kenya

Kenyan shilling steady against the dollar

(Reuters) - The Kenyan shilling held steady against the dollar on Monday
with inflows from non governmental organisations and diaspora remittances
matching dollar demand from merchandise importers, traders said. 

At 0750 GMT, commercial banks quoted the shilling at 101.20/40 per dollar,
the same as Friday's close. 

       <mailto:info at bulls.co.zw> 

China

China looks beyond U.S. Treasuries for dollar investments

(Reuters) - China may be expanding its investments beyond U.S. Treasuries
into debt issued by top-rated European and other government agencies,
allowing it to keep its money in dollar assets while picking up some extra
yield, bankers with knowledge of the matter say.

At least four investment banking officials who deal with public sector debt
report a spike in interest from China in government-linked borrowers, who
can offer an alternative to U.S. Treasuries.

Prominent among these are the European Investment Bank, a development bank
backed by European Union countries, KfW, a German government-guaranteed
institution and AIIB, a Beijing-based pan-Asian development bank that issued
its first ever bond last month.

While bond buyers are publicly identified only by geography or category,
bankers reckon recent Asian buying is led by China.

China is the United States’ biggest overseas creditor, holding $1.12
trillion of Treasuries through its central bank and various state-owned
institutions that make up the government sector.

But with Sino-U.S. trade tensions escalating, many market participants
speculate China may use U.S. Treasuries as a weapon in negotiations; recent
numbers suggested it slashed its holding of U.S. government debt to a
two-year low in March.

Others simply believe the Chinese, like many other investors, are exploring
alternatives, given the recent drop in U.S. yields. Ten-year yields are down
60 basis points this year.

And though there are signs it is buying more euro-denominated debt than last
year, China may find it tough to diversify too far into European sovereign
debt given the paucity of top-rated “safe” bonds in the fragmented euro zone
market.

Instead, Chinese investors are likely taking tactical positions away from
Treasuries in the dollar debt of sovereigns, supranationals and agencies
(SSA), a sector that includes EIB and KfW, a debt capital markets banker
said.

Demand is also coming from the Chinese banks, which have been buying SSA
paper in dollars, euros and sterling to help meet the regulatory
requirements for high quality liquid assets, the same banker added.

Any Chinese move to slowly diversify reserve investments could prove
problematic for the United States, which has over $3 trillion of debt
maturing this year and another $1.9 trillion of debt coming due in 2020.

For an interactive version of the graphic below, click here
tmsnrt.rs/2WHsCn9.

ASIAN ORDERS RISE

Given bankers’ wariness about divulging details of deals involving China, it
is hard to pin down how much Chinese investors may have purchased of recent
SSA deals.

But on May 8, Asian buyers snapped up 51% of a $3 billion EIB bond issue,
surpassing EMEA investors’ 35% share and that of American buyers who took
14%, data from one of the lead managers showed.

Data from International Financing Review shows that is the highest this year
so far, and compares to an Asian share of 30%-38% on EIB dollar deals last
year.

The trend is also discernible on KfW’s dollar issuance, with Asian takeup of
its benchmark dollar issuance averaging around 32.2% this year compared to
25.1% in the whole of last year, Reuters calculations of KfW data showed.

In the January-May 2018 period, it was 23.6%.

Generally speaking, these sub-sovereign bonds trade with yields well wide of
U.S. Treasuries because they have nowhere near the same liquidity. But that
yield gap has narrowed of late, showing investor preference for these
government-linked agencies.

EIB’s October 2024 dollar bonds for instance, have seen their spread to the
five-year U.S. Treasury bond drop from 50 basis points two years ago to 13
bps currently, a recent U.S. Treasury rally notwithstanding.

While China and other reserve managers may also increasingly buy euro
assets, there are strong arguments for staying within the dollar universe.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold steadies after hitting near 3-month peak on rate cut hopes

(Reuters) - Gold steadied below a three-month peak on Tuesday on news China
was open to negotiating its trade dispute with the United States, while
rising expectations the U.S. Federal Reserve will cut interest rates
provided underlying support.

China’s commerce ministry on Tuesday urged dialogue and negotiation to
resolve the trade differences, which have roiled financial markets.

Spot gold eased 0.1% to $1,324.01 per ounce as of 1:43 p.m. EDT (1743 GMT),
after touching its highest since Feb. 27 at $1,328.98 earlier in the
session. U.S. gold futures settled up 0.1% at $1,328.70 per ounce.

Gold prices were also pressured by a rally in equities after Fed Chair
Jerome Powell said the central bank would act “as appropriate” in the face
of trade war risks, leaving the door open for a possible rate cut.

Wall Street’s main indexes have shed more than 6% in May on fears of a
recession as U.S.-China trade tensions showed little signs of easing.

Meanwhile, gold has climbed over 4% since hitting a one-week low of
$1,274.44 an ounce last week, mainly on the back of escalating trade
tensions and expectations the Fed would cut rates to offset the impact of
the U.S.-China trade war.

Lower interest rates cut the opportunity cost of holding non-yielding
commodities, while gold also tends to benefit from growth concerns as an
alternative to cyclical assets like stocks.

Reflecting increased investor interest in bullion, holdings of SPDR Gold
Trust, the world’s largest gold-backed exchange-traded fund, rose 2.2% on
Monday, its biggest one-day percentage gain since July 2016.

Elsewhere, silver rose 0.1% to $14.79 per ounce, after touching a three-week
high of $14.84 in the session.

Platinum fell 0.2% to $818.75 per ounce after hitting a more than two-week
high of $825.78. The metal had marked its biggest intraday percentage gain
in 2-1/2 years on Monday.

Palladium jumped 1.6% to $1,344.15 per ounce. 

INVESTORS DIARY 2019

Company

Event

Venue

Date & Time

Dairibord

AGM

Steward Room, Meikles

31 May 2019, 12pm

Lafarge

AGM

Manresa Club, Arcturus

05 June 2019 , 12pm

CBZ

AGM

Stewart Room, Meikles

05 June 2019 , 3pm

 <mailto:info at bulls.co.zw> 

DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
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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
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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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