Bulls n Bears Daily Market Commentary : 25 August 2020

Tue Aug 25 16:06:24 CAT 2020

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Bulls n Bears Daily Market Commentary : 25 August 2020

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ZSE commentary

ZSE sell-off persists

The southward trend persisted in Tuesday’s session as sell-offs continued to
depress the market. The Indices also remained in the red with the mainstream
All Share Index losing a further 1.21% to 1252.93pts while, the Industrials
eased 1.16% to 4131.46pts. The Top Ten was 0.73% lower at 805.01pts with the
less active Minings sliding 3.12% to 2366.57pts. Banking group ZB was the
worst performer after slumping 20% to close at $10.4000 on scrappy shares.
Hippo Valley reversed prior gains on a 8.11% slide that took its price to
$11.4866 with agricultural concern Ariston following on a 7.42% loss as it
settled at $1.2001. Waning demand in FBC saw the banking group closing at
$7.5088 which was a 6.21% drop from yesterday. Conglomerate Meikles was
5.50% softer as it closed the session at $11.5284 and completed the top five
losers.

Thirty-five counters were active in the session as ten rose against sixteen
fallers while, nine remained unchanged. NTS topped the risers of the day
after charging 19.94% to settle at $0.0700, despite recording depressed
volume performance for its Q12020. Medtech followed putting on 7.21% to
$0.0699 while, National foods rebounded 5.18% to $47.3317. Hotelier African
sun added 4.75% to $1.0554 while, RTG wrapped the top five set on a 4.59%
lift to $2.6000. Other notable gains were registered in OKZIM, Axia, Padenga
and Innscor. Foreign purchases stood at $3.73m against sales of $12.91m,
leaving the market with a net funds outflow position.-efesecurities

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets

South Africa

South African Rand Scores New August Highs against Dollar and Sterling amid
Robust Risk Appetite

The Rand scored new August highs against the Dollar and Pound Tuesday as
investors celebrated the survival of January's phase one U.S.-China deal
while revelling in elevated hope that a coronavirus treatment could soon be
available to help curtail the pandemic even in the absence of a vaccine.

The Rand rose against all major developed and emerging world counterparts
Tuesday as stock markets climbed further and the Dollar remained under
water, with USD/ZAR and GBP/ZAR falling to their lowest levels since late
July.

Risk appetite was evidently robust after U.S. Treasury Secretary Steven
Mnuchin and Trade Representative Robert Lighthizer said "Both sides see
progress and are committed to taking the steps necessary to ensure the
success of" January's phase one deal that largely ended the trade war
between the world's two largest economies.

That came after the White House has secured a regulatory blessing for the
use of blood plasma from recovered coronavirus patients as a treatment for
those struck down by the disease, given that it can be used to pass on
antibodies that can be helpful for fighting it. 

The Pound-to-Rand rate was eyeing a return to the 22.0 handle on Tuesday
while USD/ZAR was back below 17.0 and on route to 16.50, the bottom of an
anticipted third-quarter range, as almost all currencies advanced on the
Dollar in what is set to be a quiet week for economic data. 

Global macroeconomic factors dominate the agenda this week with the
highlight being eagerly awaited speeches from Federal Reserve Chairman
Jerome Powell and a range of other central bank heads, who're expected to
address poignant policy questions from Jackson Hole on Thursday and Friday. 

Price action comes as President Cyril Ramaphosa and Finance Minister Tito
Mboweni prepare to face questions from South Africa's parliament on
Wednesday, with lawmakers set to grill the pair over an International
Monetary Fund loan and alleged corruption relating to public procurement
contracts for personal protective equipment. 

South Africa became the world's fifth largest coronavirus hotspot this month
although new daily infection numbers have tailed off in recent weeks,
indicating the country could have seen its peak, although the economy
remains battered and bruised from months of 'lockdown' while the Rand had
previously been hobbled by a loss of its yield appeal to investors following
a series of interest rate cuts from the South African Reserve Bank (SARB).

Nigeria

Nigeria's Foreign Currency Crisis Boon for Bitcoin: Country Tops Wallet
Downloads Ahead of the US

Nigeria’s weakening naira currency, as well as the shortage of U.S. dollars,
are forcing businesses to switch to bitcoin as the means of settling
payments for international transactions. Nigerian businesses need the
American currency to buy new supplies, as well as to order essential
equipment from abroad. However, formal sources of foreign currency like
banks are failing to meet this demand.

According to a report by the Nigerian publication, Businessday, even Bureau
De Change (BDCs), the popular alternative sources of foreign currency in
Nigeria, are unable to meet the high demand for dollars.

An anonymous source tells the publication that “in recent times, a few BDCs
have tried to take an education in bitcoin operation.” The education efforts
are now paying off as “many of them (businesspeople) are coming to ask us
how it works, and the ones that already know are switching to BTC for
international trade.”

Cryptocurrencies have gained prominence in Nigeria given their use as a
medium for settling cross border payments and for remittances. The global
pandemic and the associated restrictions on movement appear to have spurred
on a new wave of demand for bitcoin. More Nigerians are exploring
cryptocurrencies as shown by the number cryptocurrency wallets downloaded.

For instance, data from Local.Bitcoin.com shows that Nigeria overtook the
United States as the country with the most downloads of the Bitcoin.com
Wallet in the past week.

Out of the 18,613 wallets downloaded between 16 and 10 August, 3,473 were
from Nigeria which shows the country is well ahead of the 2,802 from the
United States. India is a distant third with a total of 1,420 downloads
during the same period.

Data from Usefultulips also shows that Nigeria is one of the countries with
high peer to peer bitcoin traded volumes in the world.

The publication also highlights the report by Blockchain.com which shows the
country leading the African continent in terms of peer-to-peer traded
bitcoin volumes. According to this report, Nigeria recorded trades valued at
$34.4 million in the second quarter of 2020.

The Nigerian newspaper also quotes Tomiwa Lasebikan, co-founder and head of
Products at Buycoins who is attributing growth in the use of bitcoin “to the
naira depreciation which has seen more people willing to hold and trade in
bitcoin.”

They are using it to buy stuff abroad, especially the people doing business
in China because it is lucrative there even though the Chinese government is
clamping down on transactions using cryptocurrencies. All you need to do is
have a VPN, you are on the internet, you can do your transaction. Bitcoin is
not censored so it is difficult for them to control. The number of people
spending bitcoin now in Nigeria is increasing like wildfire. I get all sorts
of questions these days like ‘How can I start?’ ‘How can I trade?’

Still, some experts say the increased use of bitcoin is also exposing old
challenges like poor education and ignorance. A report by Luno, a
cryptocurrency exchange, shows that “while more Nigerians were aware of
cryptocurrencies, many are not adequately educated.”

Efforts to educate Nigerians about cryptocurrencies and bitcoin are ongoing
and just recently, a local cryptocurrency exchange used the local reality
television show, Big Brother Naija to showcase bitcoin and its use cases.

Housemates in the reality show were made to participate in a bitcoin quiz.
All contestants received $500 in bitcoin.

 <mailto:info at bulls.co.zw> 

EMERGING MARKETS

Trade, vaccine optimism buoy stocks, FX; Belarusian rouble drops

(Reuters) - South Africa’s rand hit its highest in nearly a month on Tuesday
and Russia’s rouble gained as risk appetite got a boost from signs of
progress in U.S.-China trade talks and optimism around a coronavirus
vaccine.

Top U.S. and Chinese trade officials reaffirmed a commitment to Phase 1 of
their trade deal, despite deteriorating relations between the two countries.
That weakened demand for safe-haven assets such as gold and the dollar.

Commodities exporter South Africa’s rand extended gains against the dollar
to a sixth straight session, up 0.6%, while Russia’s rouble rose 0.3%
despite falling oil prices.

Eyes were also on Moscow’s ties with Berlin after German Chancellor Angela
Merkel told Russia to investigate the suspected poisoning of Russian
opposition figure Alexei Navalny.

MSCI’s index of emerging-market shares, meanwhile, scaled over six-month
highs, with Asian shares ex-Japan hitting highs not seen since January.
Germany’s gross domestic product declined less than expected, further
fuelling the rally.

The moves followed records for the S&P 500 and the Nasdaq overnight on
COVID-19 treatment optimism. The U.S. government was also considering
fast-tracking AstraZeneca’s experimental vaccine for the virus, the
Financial Times reported.

But analysts warned against exuberance as market volatility remained high
amid economic uncertainty.

In Belarus, massive protests demanding the removal of President Alexander
Lukashenko continued.

The Belarusian rouble fell to record lows against the euro and extended
losses for a fifth straight session against the dollar. Reuters exclusively
reported that the Belarus central bank will not introduce capital controls
to prevent the currency’s depreciation.

Banks were running out of foreign currency as residents sold the Belarusian
rouble, sources told Reuters. But a board member at the central bank said
the issue did not signal liquidity problems.

The Polish zloty gained 0.3% after Finance Minister Tadeusz Koscinski said
Poland’s state budget deficit may fall to 33%-50% in 2021.

Hungary’s forint was at a one-month low before a central bank meeting later
in the day that’s expected to leave interest rates unchanged.

Turkey’s lira slipped despite data showing manufacturing confidence rose to
106.2 points in August.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold slips as risk sentiment improves

(Reuters) - Gold prices fell on Tuesday as hopes surrounding a potential
COVID-19 vaccine and positive signals on the U.S.-China trade front buoyed
risk sentiment and offset support for the metal from a weaker dollar.

Spot gold fell 0.3% to $1,926.06 per ounce by 1144 GMT. U.S. gold futures
were down 0.2% to $1,936.10 per ounce.

European shares gained, with investor confidence boosted by Washington and
Beijing stating they were both dedicated to their Phase One trade agreement,
and some renewed hopes about the production of COVID-19 vaccines.

Investors are now looking forward to see if the U.S. Federal Reserve “will
tolerate inflation and put economic growth over monetary (growth),”
Commerzbank’s Weinberg said.

Fed Chair Jerome Powell is due to speak at a gathering of central bankers in
Jackson Hole, Wyoming, on Thursday, where he is expected to provide further
clarity on the U.S. central bank’s efforts to revamp its approach to
monetary policy.

Still, gold remained comfortably above the key $1,900 mark and was up nearly
27% so far this year, with a raft of fiscal and monetary support
initiatives, including near-zero interest rates, to ease the economic blow
from the pandemic pushing investors to the metal as a refuge from inflation
and currency debasement.

Meanwhile, the dollar index fell 0.2% against its rivals on Tuesday,
rendering gold cheaper for buyers in other currencies.

Elsewhere, silver fell 0.1% to $26.52 per ounce, platinum rose 1.3% to
$927.88, and palladium was down 0.5% at $2,149.74 per ounce.

Copper rises as LME inventories dwindle to 13-year low

(Reuters) - Copper prices rose on Monday as stockpiles in the London Metal
Exchange (LME) warehouse system fell below 100,000 tonnes for the first time
since 2007 and the approval of a coronavirus treatment in the United States
boosted equities.

Benchmark copper on the LME traded up 1.1% at $6,559.50 a tonne in official
rings, near last week’s two-year high of $6,707.

Rebounding demand in China has pushed prices higher, but a surge of
speculative buying means the market is vulnerable to a correction, said
Commerzbank analyst Daniel Briesemann

STOCKS/SPREAD: Low stocks and a $16.75 premium for cash copper over the
three-month contract point to tight nearby supply on the LME market.
MCUSTX-TOTAL MCU0-3

Inventories in Shanghai Futures Exchange warehouses, however, have risen
since June to 172,266 tonnes. CU-STX-SGH

MARKETS: Equities rose after the U.S. Food & Drug Administration (FDA)
authorised the use of blood plasma from patients who have recovered from
COVID-19 as a treatment for the disease.

DOLLAR: With investors in the mood for riskier assets, the dollar weakened,
making metals cheaper for buyers with other currencies.

POSITIONING: Speculators ramped up bets on higher copper prices on the Comex
exchange, building their net long position to its highest since June 2018.

On the LME, the net long in copper was equal to 6.2% of open contracts by
Wednesday, down from 18% in July, according to brokers Marex Spectron.

GRASBERG: More than a thousand mine workers in Indonesia blocked access to
the huge Grasberg gold and copper mine on Monday to protest against
coronavirus lockdown policy.

ALUMINIUM: China’s July aluminium imports made a close to sevenfold leap
year on year to their second-highest level on record.

JAPAN PREMIUMS: Trader Sumitomo Corp expects the Japanese aluminium premium
to rise to $90 a tonne in the October-December quarter, up from $79 this
quarter.

OTHER METALS: Aluminium was up 0.6% at $1,776 a tonne, zinc was flat at
$2,456, nickel gained 1.5% to $14,906, lead firmed by 0.5% to $1,982.5 and
tin dropped 2.1% to $17,205.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

SeedCo International

AGM

Virtual (https://eagm.creg.co.zw/eagmzim/Login.aspx#)

26 August 2020 | 9am

SeedCo

AGM

Virtual (https://eagm.creg.co.zw/eagmzim/Login.aspx#)

28 August 2020 | 9am

Invest Wisely!

Bulls n Bears 

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
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