Bulls n Bears Daily Market Commentary : 11 June 2019

Wed Jun 12 03:33:17 CAT 2019

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Bulls n Bears Daily Market Commentary : 11 June 2019

 <mailto:info at bulls.co.zw> 

Zimbabwe Stock Exchange Update

Market Turnover RTGS$ 13,871,609.75 with foreign buys at RTGS$ 4,076,677.00
and foreign sales were RTGS$ 5,326,230.00. Total trades were 194.

The All Share index gained 1.92 points to close at 191.65 points. OLD MUTUAL
LIMITED added $0.5874 to close at $13.9864, PADENGA HOLDINGS LIMITED
increased by $0.0953 to close at $1.8953 and INNSCOR AFRICA LIMITED rose by
$0.0571 closing at $2.3571. Other counters to advance were DELTA
COPRPORATION LIMITED  which added $0.0353 to $3.6266 and CASSAVA SMARTECH
ZIMBABWE  LIMITED which increased by $0.0237 landing at $1.7027.

On the downside;CBZ HOLDINGS LIMITED lost $0.04 to end at $0.45,  SIMBISA
BRANDS LIMITED reduced by $0.0097 to settle at $1.1003 and OK ZIMBABWE
LIMITED  was $0.0005 weaker at $0.4995.

 <mailto:info at bulls.co.zw> 

  Global Currencies & Equity Markets

South Africa

South Africa's rand lifted by EM demand, manufacturing surprise

(Reuters) - South Africa’s rand rallied more than 1% on Tuesday, stretching
its rally back from a nine-month low as cooling trade war worries and much
larger-than-expected growth in local manufacturing boosted the battered
currency and equities.

At 1515 GMT the rand was 0.88% firmer at 14.7000 per dollar, a touch off its
session-best of 14.6550 reached just as New York trading got underway, with
sentiment on the side of emerging currencies following the tariff deal
between Washington and Mexico.

Manufacturing output in April grew by a consenus-beating 4.6% year-on-year
according to Statistics South Africa, as industries blighted by the
nationwide power outages of the first quarter bounced back sharply.

Last week the rand sank to its weakest since September after data showing
growth contracted in the first quarter was almost immediately followed by a
bitter public spat among senior ruling African National Congress officials
over the Reserve Bank’s mandate.

Bonds also firmed, with the yield on the 2026 government issue down 8.5
basis points to 8.33%, its lowest level since May 2018.

Markets are also increasing bets of a rate cut by the Federal Reserve,
helping spur demand for emerging market assets offering chunkier returns.

On the bourse, stocks rose with the benchmark JSE Top-40 Index up 0.57% to
52,656.33 points and the broader All-Share Index closing 0.42% higher at
58,727.73 points.

Manufacturing companies topped the blue-chip index with consumer goods
manufacturer Tiger Brands rising 2.69% and paper packaging company Mondi PLC
up 1.17%.

Financial companies were among the biggest blue-chip winners, with Capitec
Bank up 2.25% and insurance company Discovery closing 1.68% higher on the
back of the firmer rand.

Kenya

Kenyan shilling under pressure against the dollar

(Reuters) - The Kenyan shilling edged down against the dollar on Tuesday
weighed down by dollar demand from merchandise and oil importers, traders
said.      At 0740 GMT, commercial banks quoted the shilling at 101.25/45
per dollar, compared with 101.15/35 at Monday's close.

       <mailto:info at bulls.co.zw> 

China

Stocks and currencies gain, led by Chinese markets

(Reuters) - Emerging markets gained on Tuesday as the Chinese government
moved to support its stocks and currency, but new tariff threats in the
U.S-China trade war kept risk appetite subdued.

MSCI’s emerging-market shares index rose to its highest in nearly a month
and was last up 0.6%. Mainland China shares, which have the biggest weight
on the index, rose 2.6% and 3%.

China’s government signalled further funding for infrastructure investments
in an effort to boost growth, fuelling appetite for infrastructure stocks.
Other Asian markets also rose.

Stocks in Turkey and South Africa followed, gaining 0.5% each, buoyed by a
migration deal between United and Mexico that averted tariffs on Mexican
goods.

But U.S. President Donald Trump said he was ready to impose another round of
tariffs on Chinese imports if no progress is made in trade talks with
Chinese President Xi Jinping at a G20 summit later this month, tainting
sentiment.

The Chinese yuan gained 0.3% after dropping to its weakest in more than six
months on Monday, on a stronger-than-expected midpoint and the central
bank’s plan to issue bills in Hong Kong later this month.

South Africa’s rand rose for a third day with no further escalation in the
government’s internal dispute on the central bank’s mandate. “Investors are
now turning their attention to data releases on manufacturing, retail sales
and business confidence to further gauge the economy’s health,” Lukman
Otunuga, research analyst at FXTM, said in a note.

Advances by Turkey’s lira were kept in check as Washington stepped up
pressure on Ankara over Turkish plans to buy a Russian air defense system.

The Turkish central bank’s first policy change since a rate increase in
September is coming closer, most analysts in a Reuters poll predicted. But
they expect the bank to leave rates unchanged at Wednesday’s meeting.

However, Russia’s central bank is expected to cut interest rates on Friday,
according to a Reuters poll, opening the door for a further easing cycle
later this year. The rouble was 0.3% firmer.

The Czech crown gained. The central bank governor, Jiri Rusnok, said it
would be better if the current pause in monetary policy changes were
followed by higher borrowing costs because rates are still not at normal
levels.

 <mailto:info at bulls.co.zw> 

Commodities Markets

The big copper short is back as macro fears return: Andy Home

(Reuters) - The trade war trade has returned with a vengeance as copper and
other industrial metals come under sustained fund selling pressure.

On the London Metal Exchange (LME) three-month copper fell 11% from $6,443 a
tonne at the start of May to a June 7 low of $5,740, its weakest price since
the start of January.

It has clawed its way back to $5,920 but with bearish funds still massing on
the short side it remains to be seen whether this is anything other than a
pause for collective breath.

Current market dynamics are a rerun of the price weakness in the third
quarter of last year, with investors again focused on a deteriorating
macroeconomic picture and the knock-on effect on metals demand.

And once again macro clouds are obscuring copper’s own resilient
fundamentals in the form of weak mine production growth and supply chain
disruption.

RETURN OF THE BIG SHORT

Copper’s price slide has been accompanied by, and in part driven by, a
dramatic increase in short positioning by money managers on the CME’s
high-grade copper contract.

Funds have switched from being net long to the tune of 23,126 contracts in
the middle of March to a net short of 45,677 contracts as of last week’s
Commitments of Traders Report.

Outright long positions have been pared significantly over the past couple
of months, but the real change has been a build in outright short positions.

The big fund short is back, the money men flexing their bearish views on
copper out to 91,547 contracts. That’s a new record, eclipsing the previous
record short of 87,942 contracts in July last year.

It’s another example of the increased speculative capacity on the CME
contract. Volumes are down this year, but the decline should be seen in the
context of exponential growth over the previous few years. Relative to 2016,
for example, trading activity was up 28 percent in the first five months of
2019.

Open interest has increased steadily over April and May to 283,703
contracts, the highest level since July 2018.

This mass bear positioning is being mirrored in the London market. LME
broker Marex Spectron estimates the net speculative short grew to 12% of
open interest last week, the largest collective bear bet since September
last year.

TRADING THE TRADE WAR

It’s no coincidence that funds have turned negative on copper as hopes for a
breakthrough in trade talks between the United States and Chile are fading.

Citi’s recent survey of its clients showed 81% of the bank’s customers
expect tariffs to end up being imposed on all U.S. imports of Chinese goods,
it said.

Any escalation of tariffs comes against a background of faltering
manufacturing growth, particularly in China, which is the single most
important economy for all things metallic.

The official Chinese purchasing managers index slipped into recessionary
territory in May with a headline reading of 49.4 reflecting weakening new
orders.

The complementary Caixin PMI, which captures activity among smaller and
mid-size companies, held in weak expansion mode with an unchanged reading of
50.2 in May.

The broad takeaway is that China is still struggling to reinvigorate its
manufacturing sector. Stimulus is again flowing through the economy, but
this time it’s proving to be distinctly metals-lite.

Moreover, a stuttering Chinese growth engine is being compounded by growing
evidence of a more synchronised global slowdown.

Manufacturing activity in the euro zone contracted for the fourth straight
month in May, with the weakness spreading to the previously resilient United
States.

The Institute for Supply Management’s (ISM) monthly survey showed U.S.
manufacturing growth decelerating to its weakest pace in more than two and a
half years.

An escalation of trade tariffs is only going to accentuate the growing sense
of macroeconomic gloom, which is why the markets are back on presidential
twitter alert.

FUNDAMENTAL FIGHTBACK?

Funds are expressing this renewed pessimism via short positioning on copper
because of its exposure to global manufacturing activity, first and foremost
Chinese activity.

Macro is again trumping micro.

Copper’s demand outlook may be dimming, but it’s turning out to be a weak
year for supply as well.

Global mine production fell by 1.8% in the first two months of this year,
according to the International Copper Study Group.

The mine concentrates segment of the market has been tightening in the form
of sliding smelter treatment terms.

Spot terms, which is what a smelter charges a miner for converting
concentrates into metal, ended May at their lowest level in six years,
attesting to the current scramble for raw material in China.

The refined metal part of the supply chain looks less challenged, but it is
worth noting that global exchange inventory ended May at 406,000 tonnes,
almost half what it was at the same time last year.

Throw in continued upheaval in the scrap sector, thanks to China’s steady
tightening of import quality controls, and the copper market looks on shaky
supply ground.

Right now, such considerations are being subsumed by the broader fear that
the world is heading towards manufacturing recession in a process that will
only be accelerated by the imposition of further trade sanctions by either
the United States or China.

However, with every sign that this is shaping up to be one of those years of
minimal or zero production growth, the scale of funds’ big macro short risks
a micro counter-reaction.

Gold slips to 1-week low as Mexico tariff reprieve boosts equities

(Reuters) - Gold fell to a one-week low on Tuesday as the United States
halted its plans to impose tariffs on Mexico, boosting appetite for riskier
assets like equities at the expense of alternatives like bullion.

Spot gold was down 0.4% at $1,322.39 per ounce as of $1,322.39 GMT, having
earlier hit its lowest since June 4 at $1,320.75. U.S. gold futures fell
0.2% to $1,326.1 an ounce.

Concerns over global trade and expectations the Federal Reserve would cut
U.S. interest rates sent spot prices to their highest since April 2018 last
week at $1,348.08.

Bullion lost more than 1% on Monday after markets took heart from a deal
between the United States and Mexico to avert yet another tariff war.

However, U.S. Secretary of State Mike Pompeo warned on Monday the U.S. could
still slap tariffs on Mexico if not enough progress was made on its
commitment to stem illegal immigration.

European shares rose after the latest trade news, though U.S. President
Donald Trump said he was ready to impose another round of tariffs on Chinese
imports if he cannot make progress in trade talks at a Group of 20 summit
later this month.

Gold also held above key technical levels as rising expectations for a U.S.
rate cut kept the dollar pegged near a 2-1/2 month low against a basket of
major currencies.

Among other precious metals, silver rose 0.2% to $14.69 per ounce, while
platinum was up 0.3% to $804.46 an ounce.

Palladium edged 0.1% higher to $1,382.65 per ounce after hitting a more than
one-month high of $1,393.53 in the previous session. 

INVESTORS DIARY 2019

Company

Event

Venue

Date & Time

RTG

AGM

Jacaranda Rooms 2 and 3, Rainbow Towers

12 June 2019, 12pm

Zimplow

AGM

Head Office, 36 Birmingham Road, Southerton

13 June 2019, 10am

TSL

AGM

28 Simon Mazorodze Road, Southerton

19 June 2019, 12pm

Zimpapers

AGM

Boardroom, 6th Floor, Herald House

20 June 2019, 12pm

Masimba Holdings

AGM

Head Office, 44 Tilbury Road, Willowvale

21 June 2019, 12:30pm

RioZim

AGM

1 Kenilworth Road, Highlands

24 June 2019, 10:30am

Proplastics

AGM

Palm Court, Meikles

25 June  2019, 10am

Fidelity Life

AGM

Great Indaba Room, Crowne Plaza Monomotapa

26 June 2019, 10am

GB Holdings

AGM

Cernol Chemicals Boardroom,  111 Dagenham Road, Willowvale

26 June 2019, 11:30am

Dawn Properties

AGM

Ophir Room, Monomotapa Hotel

27 June 2019, 10am

Unifreight

AGM

Royal Harare Golf Club

27 June 2019, 10am

African Sun

AGM

Ophir Room, Monomotapa Hotel

27 June 2019, 12pm

FMP

AGM

Palm Court, Meikles

27 June 2019, 12pm

MedTech

AGM

Boardroom, Stand 619, corner Shumba/Hacha Roads, Ruwa

27 June 2019, 2pm

FML

AGM

Palm Court, Meikles)

27 June 2019, 2:30pm

FBC

AGM

Royal Harare Golf Club

27 June 2019, 3pm

ZHL

AGM

Aquarium Room, Crowne Plaza Monomotapa Hotel

30 June 2019, 10am

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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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