Bulls n Bears Daily Market Commentary : 12 August 2020

Wed Aug 12 16:26:18 CAT 2020

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Bulls n Bears Daily Market Commentary : 12 August 2020

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ZSE commentary

ZSE opens holiday shortened week in losses

Losses on the market extended into the post-holiday session as all Indices
continued to wane. The mainstream All Share Index lost 4.03% to 1437.80pts
with the Industrials weakening a further 4.07% to close at 4706.19pts. The
Top Ten Index remained the major casualty amongst the Indices after
succumbing 5.65% to see it end at 911.20pts as demand in selected heavies
continued to fade. The Minings was 2.81% lower at 3517.03pts, dragged down
by losses seen in Bindura. Activity aggregates improved with volumes
exchanged advancing 69.29% to 14.09m while, values rose 63.34% to $143.07m.
Meikles and Delta were the most sought after stocks of the day as they duo
anchored both

volumes and values of the day after claiming a combined 54.17% of the former
and 76.73% of the latter respectively. The market registered a negative
breadth of fourteen as eighteen counters fell against four gainers in a
session where twenty-four counters were active.

Dairibord and Hippo were the session’s worst performers after plunging a
similar 20% to settle at $4.5600 and $10.8000 apiece. Simbisa eased 15.614%
to $6.7043, closing well offered at that level. Econet and Cassava were
amongst the top five losers as the duo lost 13.30% and 12.27% to end at
$6.1200 and $6.0797, having reached intra-day lows of $6.0000 and $5.9000 in
that order. Other notable losses were in Padenga (-8.41% to $9.2285), CBZ
(-5.94% to $22.5754), Innscor (-2.62% to $16.5000) and SeedCo (-1.35% to
$17.3089). Delta topped the gainers list after rebounding 2.54% to

close at a vwap of $15.8957 while, ART followed on an 1% lift to $2.0200.
Natfoods was 0.49% firmer at $51.2500 with Meikles completing the set on a
negligible 0.01% to $13.2499.-efesecurities

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets

South africa

South African rand on backfoot as U.S.-China tensions prompt caution

(Reuters) - South Africa’s rand edged weaker on Wednesday, ending a brief
recovery rally as intensifying tensions between Washington and Beijing
prompted investors to stay on the sidelines.

At 0645 GMT the rand was 0.13% weaker at 17.5175 per dollar compared to
Tuesday’s peak of 17.4200.

The currency has suffered sharp losses in the past two weeks, losing more
than 7% of its value against the dollar as sentiment towards emerging market
currencies soured with a pickup in the global economy seeming to be slower
than initially hoped.

In early trade the dollar was a touch higher against a basket of major
currencies.

Sentiment toward risk was soured by still simmering tensions between the
United States and China, which were ratcheted higher with U.S. President
Donald Trump’s ban on TikTok and WeChat.

The rand has been weighed down by poor economic data pointing to a deep
recession in South Africa in 2020 due to the impact of the pandemic and a
slow recovery in 2021. On Tuesday manufacturing figures for June showed a
16.3% year on year contraction after activity shrunk 32.4% in May.

Business confidence and retail sales figures due later in the session are
also set to show a strained economy.

Kenya

Kenya's famed wildebeest migration begins without foreign tourist crowds

(Reuters) - Normally, the magnificent plains of Kenya’s Maasai Mara National
Reserve are crowded with international tourists hoping to see a lion hunt
during the annual wildebeest migration - but this year COVID-19 means
Kenyans had it all to themselves.

That’s good news for animal watchers but bad for conservationists who rely
on the funds to pay for rangers and protection. By June, Kenya had already
lost 80 billion Kenyan shillings ($740 million)in tourism revenue, about
half of last year’s total, due to the coronavirus crisis.

This weekend, thousands of mostly Kenyan visitors travelled to the park to
witness the migration. There were few foreigners - Kenya shut down
international flights in March and only resumed them on Aug. 1.

So far Kenya has just over 26,000 confirmed cases of the disease and 420
deaths. Tourist resorts are required to observe strict social distancing and
hygiene measures but have been allowed to reopen.

As part of that push, the government was using celebrities like Eliud
Kipchoge, world marathon record holder, to showcase local attractions like
the Mara.

 <mailto:info at bulls.co.zw> 

EMERGING MARKETS

Turkey's lira tumbles on worries of crisis as dollar firms

(Reuters) - The Turkish lira resumed its sharp fall on Wednesday on investor
worries of a full-blown currency crisis and as a firm dollar made it more
vulnerable to a squeeze, while emerging market stocks fell on doubts over
coronavirus aid in the United States.

The lira weakened 1.7% to 7.32 against the greenback, as investors looked
for more substantial moves from the Turkish central bank to stave off a
meltdown in the currency amid concerns over depleted reserves and costly
state FX interventions.

The central bank’s decision to halt cheaper funding that had allowed primary
dealers to borrow well below its policy rate helped support the lira in the
previous session but the optimism did not carry through to Wednesday.

Commerzbank FX analyst, Esther Reichelt, said these backdoor channels to
stabilize the currency should be regarded as temporary.

“Credible and permanent interest rate hikes are necessary to control
inflation and stabilize the Turkish lira. It is therefore probably only a
matter of time before USD-TRY trades above 7.40.”

The dollar extended a bounce from last Friday against a basket of currencies
as U.S.-China tensions ratcheted higher following President Donald Trump’s
ban on U.S. transactions with the Chna-based owners of video-sharing app
TikTok and messaging app WeChat.

The MSCI’s index for emerging market stocks fell 0.2%, as a stalemate
between the Republican White House and congressional Democrats over
coronavirus relief entered a fourth day without talks on Tuesday, with each
party blaming the other for intransigence.

Most Asian markets declined, along with a rapid selling of gold. A fall in
prices of the yellow metal also hurt miners in South Africa, which pushed
the country’s main equity index 0.5% lower.

South Africa’s Sasol extended declines with a 9% fall as it warned on
Tuesday it will report an annual loss after a drop in oil and chemical
prices and the impact of the coronavirus pandemic hit earnings.

The rand eased against the dollar, as did Russia’s rouble.

Unrest in Belarus also remained in focus, as Sweden’s foreign minister said
she had been invited to an extraordinary European Union foreign affairs
meeting on Friday to discuss potential sanctions on the country following
Sunday’s presidential election there.

Currencies in central and eastern Europe including Hungary , Poland, Romania
and the Czech Republic, were mostly lower against the euro. 

 <mailto:info at bulls.co.zw> 

Commodities Markets

China's booming metal imports an echo of the last crisis: Andy Home

(Reuters) - China’s imports of industrial metals are booming.

Refined copper imports hit an all-time high of 494,000 tonnes in June and
accelerated again in July with the preliminary trade figures implying
another record high of 530,000 tonnes.

Imports of unwrought aluminium, a mixture of primary metal and alloy, surged
to 254,000 tonnes in June.

China’s trade in primary aluminium is normally minimal with imports and
exports largely cancelling each other out, while the country has
historically been a net exporter of alloy.

The only precedent for such a dramatic shift to net aluminium importer is
back in 2009, when China came to the rescue of metal markets devastated by
the impact of the global financial crisis.

The comparisons between the current COVID-19 crisis and the credit meltdown
a decade ago are accumulating.

But this may be a case of history rhyming with itself rather than repeating
itself.

While many of the drivers behind China’s import surge are similar to those
at work back in 2009, there is one important difference, namely the supply
disruption that has followed the spread of the fatal coronavirus around the
globe.

SUPPLY DISRUPTION

There was no comparable wave of supply hits in the global financial crisis
but rather a drip-drip of price-related closures.

Market forces have taken a toll on higher-cost miners this time around as
prices plunged in the first quarter of the year.

But the bigger impact has come from national lockdowns and quarantine
measures in countries supplying China with raw materials.

China’s imports of copper and aluminium scrap have collapsed by 50% and 54%
respectively so far this year.

Scrap collection networks around the world have seized up and the resulting
loss of supply has been compounded by China’s own flip-flopping on its scrap
import purity rules.

The country is the world’s largest processor of old scrap into new copper
and a major user of new scrap at the product manufacturing stage of the
supply chain.

Scrap tightness is one important driver of China’s increased appetite for
copper in refined metal form. The loss of aluminium scrap, meanwhile, is
manifest in the dramatic turnaround in alloy trade flows.

Flows of metal concentrates from producer nations such a Peru have also been
disrupted by lockdown.

Copper concentrate imports were flat year-on-year in the first seven months
of 2020, a constrained outcome given China’s continuing build-out of smelter
capacity and the consequent need for higher raw materials imports.

Lead concentrate imports fell by 25% in the first half of this year,
compounding the scrap impact on a market that is heavily dependent on
recyclable material.

Refined lead imports were subdued in the first part of 2020 but jumped to
almost 10,000 tonnes in July, the highest monthly total since March 2019.

Zinc concentrate imports remained strong over most of the first half, up 42%
on last year in bulk tonnage terms, but June’s imports slumped to a one-year
low in June as shipments from locked-down Peru all but evaporated.

Refined metal imports were also running at a subdued level until June, when
inflow jumped to a 10-month high of 65,000 tonnes.

Tin provides the clearest example of raw materials constraints feeding into
the refined metal market.

Flows of tin concentrate, largely from mines in Myanmar, fell another 8% in
January-June, extending a long-running downtrend. The combination with
closures of some of China’s own mines has seen the country lift imports of
refined tin to 9,400 tonnes from just 1,000 tonnes in the first half of
2019.

Indeed, China has flipped back from net exporter in 2018 and 2019 to net
importer of the soldering metal.

EXUBERANCE

Broken or damaged supply chains are the main differentiator, and an
unambiguously bullish one, between this and the last crisis.

However, other drivers behind China’s import surge look remarkably similar.

Now, as then, China’s giant manufacturing sector has led the global recovery
thanks to Beijing’s infrastructure-heavy stimulus.

That in turn has fed bullish exuberance on Chinese metal markets even while
the rest of the world has gone into COVID-19 meltdown. The resulting
outperformance of Shanghai contracts such as aluminium has forced open an
arbitrage window, through which increasing tonnages are now heading to
China.

Now, as then, local Chinese prices have been artificially lifted by state
purchases of unsold metal and stockpiling by regional governments lending a
helping balance-sheet hand to local producers.

Now, as then, there is a strong sense of a speculative stock surge
overlaying the industrial restocking exercise currently underway.

And just to heighten the sense of collective deja-vu, there is much
speculation that the Chinese state is itself stockpiling copper.

The State Reserves Bureau is a secretive organisation so the speculation
remains just that but every copper trader knows that the Bureau’s strategic
purchases were a big part of the copper price rally from the 2009 lows below
$3,000 per tonne to the all-time high of $10,190 in the second quarter of
2011.

There’s certainly no denying that the scale of China’s copper imports so far
this year exceeds any analysts’ estimate of a “normal” industrial restocking
cycle.

SOAKING UP SURPLUS

The real impact of China’s renewed hunger for refined metal, however, is
playing out in the international market.

LME copper stocks are currently low at 114,575 tonnes with more than half of
that earmarked for physical load-out.

Such depleted inventory seems anomalous given the massive hit to demand that
has occurred this year until you consider that China imported 440,000 tonnes
more copper on a net basis in the first half of this year than last year.

That’s 440,000 tonnes that in all likelihood won’t be coming back again and
July’s record tally will have lifted that figure significantly higher.

Similarly with aluminium. State research house Antaike is expecting primary
imports of 400,000 tonnes this year, not enough to wipe out the expected
surplus outside of China, but certainly sufficient to dent it.

How long these supercharged Chinese imports can continue remains to be seen.

But for now, it looks like China is coming to the rescue of industrial metal
markets.

Again.

Gold bounces back above $1,900 as UK data renews recession fears

(Reuters) - Gold bounced back above $1,900 per ounce on Wednesday, as weak
UK data renewed fears over a coronavirus-driven economic slump and helped
bullion erase

initial losses fuelled by a resurgent dollar.

Spot gold jumped 1.6% to $1,942.45 per ounce by 0816 GMT, rebounding from a
2.5% drop in early Asian trade. U.S. gold futures rose 0.2% to $1,949.40.
Silver        also joined the rally, adding 5.6% to $26.17.

Underscoring the economic damage caused by the pandemic, data showed
Britain's economy shrank by a record 20.4% between April and June, the
biggest contraction reported by any major economy so far.             

But European equities largely shrugged off the UK data since it was mostly
in line with expectations. 

A resurgent dollar, however, weighed on gold, with investors keeping a close
eye on a stalemate in U.S. stimulus talks and tensed U.S.-China relations.

Despite suffering the biggest one-day drop in more than seven years on
Tuesday, gold's gains for the year stood at about 28%, as investors buy it
as a hedge amid fears of currency debasement, with central banks flooding
the global economy with money to ease the pandemic blow. 

Platinum   gained 2.5% to $953.50 and palladium        rose 3.5% to
$2,164.66. 

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

CBZ

AGM

Virtual

14  August 2020 | 6pm

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for guideline purposes only and sourced from third parties.

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