Bulls n Bears Daily Market Commentary : 04 August 2020

Tue Aug 4 18:58:29 CAT 2020

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Bulls n Bears Daily Market Commentary : 04 August 2020

 <https://www.zb.co.zw/> ZSE commentary

Waning demand continues amidst low investor confidence

Selling pressure across the bourse persisted on the second day of reopening
with all the main indicators closing in the red. The mainstream All Share
Index eased a further 2.75% to end at 1661.52pts while, the Industrials was
2.71% down at 5451.68pts. The resources Index lost 3.99% to 3743.04pts with
the Top Ten Index faltering 2.78% to close the session at 1131.38pts. Market
measures remained depressed with volumes exchanged amounting to 1.84m shares
down 1.82% from prior session while, turnover rose 19.55% to $12.26m.
Medtech anchored the volumes for the second consecutive session as circa
0.60m shares exchanged hands. Innscor led the value contributors as 0.30m
shares worth $6.30m traded in the conglomerate. Thirty-seven counters were
active in the session as twenty-five lost ground against seven gainers,
leaving the remaining five to sail stable.

Turnall and RioZim were the session’s the worst performers for the day after
sliding by an identical 20% to end at $0.8000 and $8.000 while, Dairibord
followed succumbing 19.94% to close at $6.7500. Apparel retailer Truworths
lost 19.66% to trade at $0.1543 while, Lafarge completed the top five losers
set on a 18.87% drop to reach $4.9000. Other notable losses were seen in
Meikles (-10.71% to $12.50), Delta (-8.19% to $19.5917), Econet (-2.45% to
$8.1007), Innscor (-2.51% to $20.7920), SeedCo (-2.20% to $18.0000) and
Cassava (-1.78% to $8.1520). Gains for the day were seen in Zimplow which
ticked up 14.78% to $3.5008, Padenga that added 4.98% to $11.6000, FMP which
rose 2.44% to $2.1000, Proplastics that put on 1.45% to $7.0000 and ZHL
which completed the top five list on a 1.05% rise to close at $2.5000.-EFE
Securities

Global Currencies & Equity Markets

South Africa

South Africa's rand hits new 3-week low, stocks slip

(Reuters) - South Africa’s rand slumped to a new three-week low in an
emerging market rout on Friday as investors’ hopes for a global recovery
were dented by a sharp contraction in the U.S. economy.

At 1640 GMT, the rand was 1.63% weaker at 17.0250 per dollar, its weakest
since July 8, adding to Thursday’s 2% plunge.

Sentiment towards the rand has been driven by offshore events in recent
weeks, with stimulus programmes by developed market central banks and a
relaxation of lockdown restrictions spurring the currency to pre-COVID-19
pandemic levels in June.

But signs of a resurgence in global infections have since tamed global
demand for assets perceived as risky. That has put renewed pressure on the
rand, which was already vulnerable given South Africa’s economic recession
and jump in coronavirus cases.

Data on Thursday showed the United States, the world’s largest economy,
contracted at its steepest pace since the Great Depression in the second
quarter.

South African stocks dipped, tracking global markets.

The Johannesburg Stock Exchange’s Top-40 Index fell 0.16% to 51,369 points,
and the broader All-Share Index closed down 0.22% at 55,722 points.

Among the fallers, the bullion sector shed 2.45%, with AngloGold Ashanti
down 5.34% to 554.73 rand.

Shares in MTN closed down 2.46% after scrapping its 2020 interim dividend
and announcing its CEO had been appointed to head the enterprise unit of
British broadband and mobile operator BT from next year.

Bonds were firmer, with the yield on the benchmark government bond due in
2030 down 5 basis point to 9.245%. 

Kenya

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

(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.

“All these point to strong growth in 2020 despite COVID,” he said, adding
that the bank’s economic growth forecast would be released soon.

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

Turkish lira leads EMEA FX gains as July factory data improves

(Reuters) - Turkey’s lira led gains among currencies in Europe, the Middle
East and Africa (EMEA) on Tuesday on positive manufacturing and inflation
readings, while improving U.S. data also helped sentiment.

The lira rose as much as 0.7% to the dollar after data showed July
manufacturing activity grew at its fastest rate in nine years.

Moderating consumer price inflation in the country also pointed to more
economic stability, although analysts were sceptical that inflation could
remain fettered.

Turkish stocks led gains in EMEA, adding more than 1% as they resumed trade
after a long weekend.

Russia’s rouble fell about 1% to the dollar, while stocks were weighed down
by losses in major energy firms.

Oil prices retreated as fears of the coronavirus’ rapid spread undercut bets
on improving fuel demand.

However, positive U.S. manufacturing data helped lift broader sentiment,
while markets also looked to fresh stimulus measures in the world’s largest
economy.

Central European currencies such as the Hungarian forint and the Polish
zloty rose to the euro.

Polish manufacturing recovered in July after a coronavirus lockdown was
eased, a survey showed on Monday, but Hungary posted a more modest
improvement and the Czech Republic did not return to growth, suggesting the
region still faces challenges.

Stocks in the region traded slightly higher for the day.

Emerging market risk assets had marked strong gains in July, amid improving
economic data and hopes for a coronavirus vaccine. But they are yet to reach
pre-pandemic levels.

For instance, the MSCI’s index of developing world stocks , which rose about
1% for the day, was about 5% off a peak hit in January.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold's mega rally faces $2,000 hurdle, but for how long?

(Reuters) - Gold’s rally has halted just below $2,000 an ounce partly due to
fierce technical resistance, but an eventual break above that level is
likely, freeing prices for more record highs, technical analysts said.

The gold price has surged 30% this year to an all-time peak around $1,975 an
ounce and is one of 2020’s best-performing assets.

The rally was driven by a belief that gold will hold its value better than
other assets as fallout from COVID-19 ripples through the global economy.

Central bank stimulus has pushed inflation-adjusted U.S. bond yields to
record lows, making non-yielding gold more attractive, and the dollar has
weakened sharply, making bullion cheaper for buyers with other currencies.

The never-before-reached $2,000-an-ounce mark is a major psychological
resistance level, with gold’s 49-year trend channel resting just below it at
$1,983, said Commerzbank technical analyst Karen Jones.

Only an end-of-month or, better yet, end-of-quarter close above these levels
will signal a break from the channel, she said.

Technical analysts seek patterns and signals in price charts which allow
them to predict and interpret moves. Traders and automated trading systems
also take prompts from technical signals.

Because gold’s rally has been so fast, a downward correction is likely and
could be brutal, analysts said, before the market attempts another stab
higher.

Early support is coming in around its 20-day moving average, at $1,875, and
the bottom of its 4-month uptrend, around $1,830.

Below that is more powerful support at the 20-week moving average, currently
at $1,755, said Tom Pelc, an independent technical analyst formerly at
Nomura and RBS.

Such a fall wouldn’t necessarily doom the longer-term uptrend.

If resistance is broken, Fibonacci extensions offer short-term targets.
These are based on the idea that a rally will extend in predictable
proportions extrapolated from a previous rally. One is at $2,067, said Pelc,
another comes in at $2,286.

That could only be the beginning of a multi-year move. Lucas ratios — a tool
using a sequence of numbers similar to Fibonacci’s — suggest gold could rise
to $3,598.80 an ounce in 4-5 years, said Pelc.

Top aluminium producer China Hongqiao quits international body

(Reuters) - China Hongqiao Group, the world’s biggest aluminium producer,
has left the International Aluminium Institute (IAI) only four years after
joining the global industry body for the metal used in everything from cars
to cans.

The move means the Chinese aluminium giant has broken ranks with a body that
represented companies producing more than 60% of the metal and its raw
materials bauxite and alumina worldwide, prior to Hongqiao’s departure.

Hongqiao, which has about 6.5 million tonnes of licensed annual aluminium
smelting capacity, became an IAI member in 2016 and now employs former IAI
secretary-general Ron Knapp as an adviser to the company’s chairman, Zhang
Bo.

Knapp confirmed to Reuters that Hongqiao had resigned from the IAI but
declined to comment on the reasons.

The IAI, whose website no longer lists Hongqiao as a member, declined to
comment on Tuesday.

Its objectives include increasing the market for aluminium by enhancing
awareness of its qualities and providing a global forum for aluminium
producers on matters of common concern for its now 26 members.

China is by far the world’s biggest aluminium producing and consuming
country.

Hongqiao chairman Zhang previously served as vice chairman of the IAI, which
is currently chaired by Alcoa Corp executive Ben Kahrs and has a secretariat
in London.

Other members include Aluminum Corp of China, known as Chinalco, Rio Tinto ,
United Company Rusal and Norsk Hydro.

Other organisations Shandong-based Hongqiao would like to work with include
the Aluminium Stewardship Initiative, a standards-setting body that aims to
foster responsible production and sourcing of the metal, Knapp said.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

Zimbabwe

National Heroes Day

Zimbabwe

10  August 2020

Zimbabwe

Defence Forces’ Day

Zimbabwe

11  August 2020

CBZ

AGM

Virtual

14  August 2020 | 6pm

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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
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companies typically involve a higher degree of risk and more volatility than
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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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