Bulls n Bears Daily Market Commentary : 31 July 2020

Sat Aug 1 06:38:24 CAT 2020

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Bulls n Bears Daily Market Commentary : 31 July 2020

<https://www.renaultzimbabwe.com/cars/kwid/index.html?utm_source=newsletter&
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talcorp-jul20> ZSE commentary

Zimbabwe to resume stock trading, Old Mutual unit remains suspended

(Reuters) - Zimbabwe’s stock market will resume trading next week after a
state financial intelligence body concluded an investigation, but three
stocks also listed on other exchanges, including Old Mutual, will remain
suspended, the finance minister said on Tuesday.

Mthuli Ncube Ncube said investigations revealed that investors used the Old
Mutual Ltd share price as a proxy exchange rate implied by its prices on
foreign bourses such as the London Stock Exchange.

This had caused the slide in the value of the Zimbabwe dollar, Ncube said.

The government halted trading on the bourse last month, saying it was being
used by speculators to undermine the currency.

Old Mutual said in a statement that it was in talks with Zimbabwean
authorities so that the insurer’s listing would not continue to create the
concerns raised by the government.

The suspension of the stock exchange and some mobile phone-based payments
was intended to arrest the currency slide at a time of severe economic
crisis but has spooked some investors already skittish about Zimbabwe.

Ncube said an investigation by the Financial Intelligence Unit revealed a
link between the movement in prices of three dual-listed stocks and the
parallel market rate of the Zimbabwe dollar.

But there was no evidence that Old Mutual, Pretoria Portland Cement and
SeedCo International, were involved, Ncube said.

Morgan Nzwere, group CEO of SeedCo, said the company had not committed any
offence and would wait for regulators to conclude investigations. PPC did
not immediately respond to requests for comment.

Trading on the Zimbabwe Stock Exchange would resume on Aug. 3 but the three
stocks would remain suspended “while further consultations continue on the
best way forward regarding their re-listing under suitable rules,” Ncube
said.

Stock market traders say the government is pushing to de-list the three
firms and list them on a yet to be established dollar-denominated exchange
in the resort town of Victoria Falls.

President Emmerson Mnangagwa’s ruling ZANU-PF party has recommended the
de-listing of Old Mutual. 

Global Currencies & Equity Markets

Nigeria

Starved of dollars, Nigerian businesses struggle for survival

LAGOS/ABUJA (Reuters) - As women in hairnets and anti-coronavirus masks sort
through folded nappies coming off a conveyor belt, the head of the Nigerian
firm they work for wonders how much longer he can afford to keep them in
employment.

Around 80% of the materials that go into Lagos-based diaper and sanitary
towel manufacturer Wemy’s products are imported. To buy them, Paul Odunaiya
needs dollars, which he can no longer find.

With the price of oil, Nigeria’s main export, depressed and foreign exchange
reserves dwindling, its central bank is hanging on to its dollars to support
the local naira - leaving a dwindling supply of hard currency to buy the
imports that are the bedrock of Africa’s largest economy.

Muda Yusuf, director general of the Lagos Chamber of Commerce, said that,
like Odunaiya, the dollar shortage is hitting most of its 2,000 members
hard.

Inflation has risen for 10 straight months, hitting a two-year high of
12.56% in June, piling on greater economic hardship for a population of whom
40% already live below the official poverty line of 137,430 naira ($382) per
year.

Added to that, there have been two devaluations of the naira’s official rate
this year.

With the oil market depressed by a producer price war and the
pandemic-induced global recession, central bank reserves have fallen 20% in
the past year to $36.1 billion, around five months of import cover.

The bank initially sought to stem the decline by suspending dollar auctions
in March and continues to severely ration their supply.

The government says the economy could shrink by up to 8.9% in 2020, while
many of the local banks that Nigerian companies rely on have seen their
dollar credit lines halted by international lenders who fear they won’t be
paid back.

Many firms have resorted to the black market, where the naira trades at
around 20% below the official rate, making dollar purchases even more
expensive.

Kenya

Kenya central bank has 'plenty of firepower', governor says

NAIROBI (Reuters) - Kenya’s central bank governor said on Thursday that
policymakers still had plenty of firepower left to limit the damage to the
country’s economy from the coronavirus crisis.

Policymakers cut the benchmark lending rate by a total of 125 basis points
at the onset of the crisis, lowered cash reserves for commercial banks and
allowed them to restructure distressed loans.

Njoroge said good weather had boosted production volumes and exports of key
crops like tea.

A rebound in exports of flowers, as well as projected higher production of
other crops like maize and higher production of cement, promised a quicker
economic recovery than earlier anticipated, he said.

He lowered the current account deficit forecast for this year to 5.1% of GDP
from the previous forecast of 5.8%.

He cited a better-than-expected performance in hard cash sent by Kenyans
living abroad, known as remittances, and the rebound in farm exports.

The central bank now expects remittances to grow by 1% this year, an
improvement of its initial forecast of a drop of 12.3% due to COVID-19.

The central bank was not concerned by the recent depreciation of the
shilling, which is down 6.3% against the dollar this year to date.

The bank’s Monetary Policy Committee has gone back to meeting to review
rates every two months, it said, after it started meeting every month in
March because of the coronavirus crisis.

 <mailto:info at bulls.co.zw> 

EMERGING MARKETS

Currencies set for best month in 2020 as dollar languishes

(Reuters) - Emerging market currencies were set for their best month this
year on Friday, as the dollar was on track to record its worst month in a
decade on doubts about a U.S. economic recovery, while a pick-up in Chinese
factory activity aided riskier bets.

The MSCI’s index for emerging market currencies gained 0.3% on Friday and
was up 1.5% in July, as confidence eroded in the world’s reserve currency.

The dollar fell to a two-year low a day after U.S. President Donald Trump
raised the possibility of delaying the November presidential election,
moments after data showed U.S. GDP contracted at the sharpest pace since the
Great Depression in the second quarter.

A weaker U.S. currency and excess liquidity stemming from stimulus packages
in developed markets have boosted buying interest in emerging market
currencies.

South Africa’s rand edged higher, outperforming its peers in July, as
investors valued the rand’s yield differential, or carry, keeping focus off
the country’s mounting fiscal fragility.

The Turkish lira edged up as a four-day holiday kicked off and thinned
market liquidity. It was recently plagued with concerns of depleted FX
reserves and costly state interventions to steady the currency.

Russia’s rouble largely underperformed its peers for the week and the month,
but analysts say a worse oil price outlook, prospect of further rate cuts
and speculation of more U.S. sanctions are not the only causes for its
weakness.

Further supporting the risk-on mood was data which showed China’s factories
stepped up activity in July for a fifth straight month on improving
prospects for electrical and pharmaceutical goods.

Stocks in the developing world were set to clock their biggest gains since
April on improving economic indicators and global stimulus steps, but
caution prevailed due to surge in COVID-19 cases in hotspots including
Brazil, India and Russia.

Hungary’s forint was set to outperform central and eastern European units in
July, with most currencies in the region firming broadly after European
Union leaders struck a deal on the 750-billion euro ($889.50 billion)
coronavirus recovery fund early last week.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Asia Gold-Chinese discounts hit record as pandemic hammers physical demand

BENGALURU/MUMBAI (Reuters) - Chinese gold dealers were forced to offer the
steepest-ever discounts this week as physical demand plunged, while the
Indian market flipped to a premium again.

Discounts of $42-$88 per ounce were offered versus global benchmark rates in
top consumer China, against last week’s $20-$37 range.

International spot prices hit a new record of $1,980.57 on Tuesday on
surging safe-haven investments due to the coronavirus outbreak.

The Chinese market has been in discount since February.

Indian consumption could plunge to a 26-year low in 2020, the World Gold
Council said.

Indian dealers charged premiums of about $8 an ounce over official domestic
prices, inclusive of 12.5% import and 3% sales taxes, versus last week’s $6
discount, but retail demand remained weak.

India’s gold imports plunged 96% year-on-year in the June quarter to 13
tonnes.

Dealers expect the government to substantially raise the base import price,
set every fortnight, for the first half of August, considering the global
rally, Kothari said.

Local gold futures hit a record 53,844 rupees per 10 grams on Friday.

Hong Kong prices fluctuated between a $0.50 discount to a $1.50 premium.

Singapore premiums were unchanged at $0.8-$1.50.

Silver demand has “exploded,” said Vincent Tie, sales manager at dealer
Silver Bullion. Spot silver was set for its best month on record.

Brian Lan, managing director at dealer GoldSilver, said many wholesalers and
manufacturers are also selling to take profits.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

ZHL

AGM

virtual

31 July 2020 |

Delta

AGM

Virtual, Head Office, Northridge Close, Borrowdale

31 July 2020 | 12:30pm

Zimbabwe

National Heroes Day

Zimbabwe

10  August 2020

Zimbabwe

Defence Forces’ Day

Zimbabwe

11  August 2020

CBZ

AGM

Virtual

14  August 2020 | 6pm

 <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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