Bulls n Bears Daily Market Commentary : 18 August 2020

Tue Aug 18 16:17:37 CAT 2020

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Bulls n Bears Daily Market Commentary : 18 August 2020

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ZSE commentary

Top Ten swings into the black

The banking group CBZ helped swing the Top Ten Index into the black,
breaking three consecutive weeks of losses. The group topped the risers set
on a 13.25% surge that took its price to $24.8698, having reached a high of
$26.0000 on resurgent demand. The mainstream All Share Index was 0.42%
softer at 1347.48pts while, the Industrials lost 0.37% tom end at
4434.38pts. The Minings dropped a further 1.93% as demand continued to wane
in nickel miner Bindura. Activity aggregates reflected a mixed outcome with
volumes dropping 33.68% to 3.77m shares while, values were 16.18% up from
yesterday. The capital flight continued the market as foreign purchases
registered a mere $0.45m against disposals of $6.05m.

Thirty-three counters were active in the session as four gained against
nineteen laggards, leaving the reminder of ten to sail stable. Other gains
were recorded in Star Africa which added 0.28% to $0.1795, Padenga which
advanced 0.14% to $9.0200 and National foods which notched a negligible
0.04% to end at 51.2720 on firm demand. Edgars was the worst performer of
the day, reversing its previous gains with a 18.93% plunge to settle at
$0.6080 with brick maker Willdale following sliding 10.31% to $0.2054.
Fintech group Cassava was 6.93% down at $4.9978, having traded a low of
$4.9500 on the back of selling pressure. Zimpapers dropped 5.80% to $0.6500
while, banking group FBC continued to lose its glitter after letting go a
further 5.71% to close at $9.9000. Other losses were seen in Econet (-2.54%
to $4.9500), Delta (-0.22% to $15.8540), Innscor (-2.64% to $14.9444),
Simbisa (-4.27% to $6.0000), Meikles (-3.53 to $12.20) and OKZIM (-1.18% to
$3.9501). efesecurities

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets

South Africa

South African Rand Appreciation Dependent on Global Drivers says Goldman
Sachs

The South African Rand can recover more of the ground it has lost in 2020 if
global markets and commodity prices continue to appreciate say economists at
Investec and Goldman Sachs.

The Rand is one of the worst performing major currencies of 2020 thanks to
the coronacrisis which has only exacerbated dire domestic policies
undermining the country's economy, but the currency's losses would be more
substantial were it not for recovering global stock markets.

An ongoing improvement in U.S. and European markets, as well as global
commodity prices courtesy of the Chinese rebound, continues to provide a
much-needed source of support for the hard-up Rand, and this could continue
in the near-term according to Annabel Bishop, an economist at Investec. "The
rand ... continues to take its cue from international events, along with
other emerging markets".

While global factors are supportive, Pandl says domestic headwinds should
continue to limit appreciation as "much of the Rand’s underperformance may
be attributable to domestic factors, including disappointing activity data,
and concerns around coronavirus management and the prospects for structural
reforms."

ZAR has struggled in 2020

Above: ZAR performance in 2020

South Africa on Monday night eased restrictions as covid-19 infection rates
continue to move lower, which should take some pressure of the battered
economy.

However, Goldman Sachs say a significant output gap in the economy should
linger for some time and this will likely ensure inflation remains
persistently below the South African Reserve Bank's inflation target of 6%.

Economists at the Wall Street investment bank expect inflation to
persistently undershoot the target for the foreseeable future, potentially
leading the SARB to cut an additional 0.50% in the first half of 2021 and to
keep the policy rate on hold at a historic low of 3.0% through at least
2022.

Emerging Market economies tend to have higher interest rates at their
central banks, resulting in higher bond yields and interest rates on cash
deposits. This tends to attract significant inflows of foreign capital as
global investors seek out higher yields which in turn provides demand for
the domestic currency.

But cutting interest rates back tends to diminish this attractiveness to
investors, particularly in countries where political uncertainty and
economic troubles are growing. Therefore, lower rates for longer at the SARB
will act as a headwind to the Rand.

Despite these domestic headwinds, Investec's Bishop says the Rand can yet
drift slightly stronger over coming days "in the absence of any significant
negative global market events".

The key risk to any Rand appreciation - given the international backdrop is
its main source of support - therefore lies with the performance of global
markets and whether recent optimism can persist.

The U.S. stock market - which the Rand has a high 'beta' to (close positive
correlation) - has effectively recovered its coronacrisis losses.

But there are warning bells sounding says Neil Wilson, Chief Market Analyst
for Markets.com, "the U.S. stock market is only at all-time highs because of
the Fed and huge fiscal stimulus; it does not reflect reality."

Wilson says forward earnings multiples of ~25x for the S&P 500 are unlikely
to persist while put-call ratios on stock options markets are moving in a
direction that often correlates to a reversal.

Moreover, volatility futures point to investors expecting increased market
volatility into the autumn as the U.S. presidential race inevitably
tightens.

Nigeria

Dollar Squeeze Chokes Nigeria’s Economy as Recession Looms

Nigeria’s foreign-currency shortage is squeezing the life out of Africa’s
biggest economy.

Banks won’t honor card payments, foreign investors can’t get their money out
and manufacturers are unable to import vital raw materials as output hurtles
toward a second contraction in four years.

Dependent on oil exports for half of its revenue, the Nigerian government’s
coffers have emptied after crude prices plunged in the wake of the
coronavirus pandemic. There’s little prospect of a respite any time soon: it
needs oil prices of $70 per barrel and production of 2 million barrels a day
to balance its budget, but prices are hovering around $40 and OPEC curbs
have restricted the nation’s output to about 1.4 million barrels a day.

The evaporation of foreign income forced the central bank to halt weekly
interbank foreign-currency sales since March. Now the effects of the dollar
shortage are seeping through to the economy.

The International Monetary Fund predicts Nigeria’s economy will contract by
5.4% this year, the most in four decades. The latest official job figures
put the second-quarter unemployment rate at 27.1%, the highest in a decade.
Inflation, meanwhile, accelerated to 12.8% in the year through July, from
12.6% the previous month, as prices of imports including food surged.

Lenders including Guaranty Trust Bank Plc, Nigeria’s biggest by market
value, have cut the amount of foreign currency customers can spend on
payment cards abroad to $100 a month from $3,000. Rules on what companies do
with the dollars they receive have also been changed, said Emeka Mgbeahuru,
who runs Tropitec Ltd., an importer of agricultural equipment from Italy and
China with distribution links across west and central Africa.

Many banks are following a template they used when they went through a
similar contraction in 2016, which was to cut customers’ foreign payments
and wait for crude prices to recover before raising the limits.

Central Bank of Nigeria spokesman Isaac Okorafor didn’t respond to a call
and messages seeking comment.

The shortage of foreign currency is forcing some companies to consider
closing down, said Ubiji.

 <mailto:info at bulls.co.zw> 

GLOBAL MARKETS

Equities stall on widening U.S.-China rift; dollar slides

(Reuters) - European shares slipped on Tuesday as simmering political
tensions between the United States and China escalated, while concerns over
a deadlock on further U.S. fiscal stimulus drove the dollar towards a
two-year low against its rivals.

A weaker opening for the region’s blue-chip euro STOXX 50 weighed on Asian
stocks with MSCI’s broadest index of Asia-Pacific shares outside Japan
giving up early gains to trade flat.

U.S. stock futures were down 0.2%, pointing to a weaker start on Wall Street
and inching back slightly after tech stocks had pushed sister index the
Nasdaq to a record high on Monday.

Underpinning much of the equity market weakness was a fresh instalment of
the escalating spat between the United States and China, with President
Trump announcing further restrictions overnight on tech giant Huawei
Technologies Co.

Amid concern about the close ties between Beijing and the maker of mobile
phones and other tech, the Trump administration moved to limit its access to
commercially available chips, a move set to disrupt global supply chains.

Amid a sea of red for European equities, Britain’s blue-chip FTSE 100 stood
out, down 0.8%. Among the losers, mining company BHP Group after profit
missed forecasts and it warned of a slowing global economy outside China.

In Asia, Korean stocks fell 2%, with Chinese blue chips flat and Japan’s
Nikkei dipped 0.2%.

Investors had to balance the moves against Huawei with Trump’s comments that
China was meeting its obligations under the trade deal, pushing the Chinese
currency to a more than 5-month high against the greenback.

In currency markets, the overarching theme was the broadening dollar
weakness story which weighted on European government bond yields and lifted
the prices of alternative safe-haven assets such as gold.

The latest blow to the struggling dollar came from disappointing
manufacturing and mortgage data with the greenback hitting a fresh 5-1/2
year low against the Swiss franc and nearing a two-year low against a basket
of its rivals, hit earlier this month. In bonds, benchmark 10-year U.S.
Treasuries were last down around 1 basis point at 0.6671. In Europe, German
government bond yields held steady at a three-day low, eyeing rangebound
trade ahead of crucial flash PMI data on Friday.

In commodities, oil prices edged lower, giving up a slice of their recent
gains after OPEC+ said the producer grouping was almost fully complying with
output cuts.

Brent crude was down 3 cents, or 0.1%, at $45.34 a barrel, after gaining
1.3% on Monday. U.S. crude was down 0.3%, at $42.78 a barrel, having risen
2.1% in the previous session

Safe haven gold closed higher after Berkshire Hathaway also disclosed a
stake in Toronto-based Barrick Gold Corp, one of the world’s largest mining
companies.

Spot gold added 1% to once again breach the $2,000 an ounce barrier, trading
at $2,006 an ounce.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Nickel rises as ore supply from Philippines falls

(Reuters) - Nickel prices jumped on Monday, with Shanghai futures of the
metal on track for their third straight session of gains, as ore output in
the Philippines slumped due to the COVID-19 crisis.

The most-traded October nickel contract on the Shanghai Futures Exchange
climbed 1.9% to 115,290 yuan ($16,613.59) a tonne by 0532 GMT, while
three-month nickel on the London Metal Exchange rose 1.1% to $14,520 a
tonne.

Nickel content of ores extracted by miners in the Philippines, the world’s
biggest exporter of the material, dropped 28% year-on-year to 102,310 tonnes
in the first half of 2020, data from the Mines and Geosciences Bureau
showed.

However, the two biggest nickel miners in the Philippines said they do not
expect further major disruptions to their operations for the remainder of
the year, even as coronavirus cases surge in the country.

A series of upbeat economic data released this month from top consumer China
also supported prices, with rising auto sales and factory activity
suggesting that the economy was recovering from coronavirus-driven lows.

Nickel ore prices at Philippine ports SMM-NIC-NLOLYGP were hovering at their
highest level in eight and a half months at $10.25 a tonne, data from metals
prices provider SMM showed.

FUNDAMENTALS

* ShFE stainless steel futures climbed as much as 4.2% to 14,775 yuan a
tonne.

* China’s Contemporary Amperex Technology Co Ltd is developing a new type of
electric vehicle battery that contains no nickel or cobalt.

* LME copper advanced 0.6% to $6,402.50 a tonne, aluminium rose 0.2% to
$1,749.50 a tonne, while ShFE copper increased 1.2% to 50,490 yuan a tonne
and ShFE aluminium eased 0.5% to 14,305 yuan a tonne.

Gold rate today: Yellow metal trades higher; may rise to Rs 54,800 per 10
grams level

Gold prices in India traded higher on the Multi Commodity Exchange (MCX)
Tuesday following gains in international spot prices on weak US dollar.
Silver prices also increased by over 2 percent.

At 11:33 am, gold futures for October delivery surged 0.80 percent to Rs
53,700 per 10 grams as against the previous close of Rs 53,275 and opening
price of Rs 53,415 on the MCX. Silver futures traded 2.28 percent higher at
Rs 70,731 per kg. The prices opened at Rs 69,445 as compared to the previous
close of Rs 69,155 per kg.

International gold prices edged up on Tuesday on the back of a weaker
dollar, although gains were capped by a rally in US equities and signs of a
recovery in global economic activity, a Reuters report said.

Investors now await the minutes from the US Federal Reserve's last policy
meeting due for release on Wednesday.

Gold futures breached $2,000 per ounce level and the upmove is likely to
continue. The prices may test $2,040 levels, Kedia added.

Meanwhile, silver prices jumped more than 2 percent supported by a rally in
base metals. Silver price may test Rs 73,500 going ahead, according to
Kedia.-cnbctv18

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

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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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