Bulls n Bears Daily Market Commentary : 27 August 2020

Thu Aug 27 16:28:59 CAT 2020

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Bulls n Bears Daily Market Commentary : 27 August 2020

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ZSE commentary

ZSE gains extend

Gains on the ZSE extended in Thursday trades for the second session running
sustained by resurgent demand mainly in heavies. The Top Ten Index was the
best performer amongst the Indices as it ticked up 1.07% to 813.62pts,
trailed by the mainstream All Share Index which added 0.65% to 1261.08pts.
Not to de outdone, the Industrials also rose 0.59% to 4155.72pts with the
Minings advancing 3.21% to 2442.43pts on the surging Bindura. A positive
market breadth was registered as nineteen counters gained against eight
laggards, leaving the remainder of three to sail stable. Insurer Fidelity
and tyre manufacturer NTS topped the risers of the day on an identical
19.91% surge to close at $0.3920 and $11.0800, respectively. Hotelier
African Sun edged 18.93% higher to $1.3180 with Art charging 18.47% on
scrappy 100 shares. Bindura was 17.08% higher at $2.8066 to complete the top
five risers set. Other notable gains were seen in OKZIM, Padenga, AFDIS,
Delta, Econet and Innscor.

Proplastics and RTG were major shakers of the day after succumbing a similar
7.69% to $6.0000 and $2.4000, respectively. Banking group First Capital lost
6.25% to end at $0.6750 while, Zimpapers slid 5.56% to settle at $0.6800.
Waning demand in Cassava saw the fintech group closing at a vwap of $4.2352
which was 4.55% down from prior session. Other losses were registered in
Star Arica and Willdale. Volumes exchanged declined 33.38% to $10.67m
shares, yielding a value outturn of $60.04m which was a 41.69% drop from
yesterday. The capital flight continued as inflows of $10.37m were recorded
against outflows of $42.93m..-efesecurities

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets

Nigeria

Nigeria targets non-oil exporters to boost FX as recession looms

(Reuters) - Nigeria’s central bank is trying to force non-oil exporters to
process dollar proceeds through domestic lenders to increase dollar
liquidity and support the ailing currency, a circular seen by Reuters showed
on Thursday.

The central bank said exporters who fail to remit dollar proceeds through
the lenders will be denied access to official currency markets, the circular
said.

Exporters have cited the value of the currency on the official market, where
the naira is trading at a discount of around 20% to the black market, as a
reason for hoarding dollars or bypassing banks to take advantage of black
market rates.

Exporters also sometimes conduct trade via offshore accounts.

The central bank also directed lenders to stop processing letters of credit
for imports for third-party suppliers or brokers with immediate effect. That
could limit imports into the country.

Nigeria, which for months has sought to shore up its dwindling reserves,
posted an economic contraction of 6.1% in the second quarter and expects
further contractions in the third and fourth quarters, the presidency said
on Wednesday.

Nigeria has been rationing dollars in recent months to conserve reserves
after it moved to unify its multiple exchange rates this month to qualify
for a $1.5 billion World Bank loan, which is yet to be approved.

But dollar shortages have worsened afterwards with reserves now down 11.5%
from a year ago. The bank has now turned its spotlight on exporters.

The central bank has proposed talks with chief executives of multinational
companies in Nigeria to discuss the revamp of exports, particularly for
agricultural produce, and diversifying the country away from its reliance on
crude oil.

But plans face hurdles as weak growth and rising inflation hobble businesses
worried about consumer demand and the impact of the coronavirus on logistics
and global supply chains.

Cocoa is Nigeria’s biggest non-oil export but the sector has struggled to
compete with top producers Ivory Coast and Ghana due to low yields, poor
farm inputs and financing, which limits output.

Zambian kwacha seen under pressure, Tanzanian shilling set to firm slightly

(Reuters) - The Zambian and Kenyan currencies are likely to face pressure
next week, while Tanzania’s is expected to strengthen slightly.

ZAMBIA

The kwacha is expected to remain under pressure against the U.S. dollar next
week owing to demand pressure and negative sentiment after the abrupt
removal of the central bank governor.

On Thursday, commercial banks quoted the currency of Africa’s second-largest
copper producer at 19.4000 per dollar from a close of 19.0370 a week ago.

Zambian President Edgar Lungu on Saturday summarily dismissed central bank
governor Denny Kalyalya and replaced him with former deputy finance minister
Christopher Mvunga.

KENYA

The Kenyan shilling is expected to stay on the defensive next week as dollar
demand remains robust but inflows lacklustre.

Analysts anticipate the shilling to be rangebound next week, trading around
108.20/60, compared to Wednesday’s close of 108.15/35.

NIGERIA

The Nigerian naira is seen flat in the coming week after the central bank
reeled out new measures targeted at exporters to try to boost dollar
liquidity on the currency market, traders said.

The naira was quoted at 477 per dollar on the unofficial market on Thursday,
a level it reached a week ago.

The currency was traded at 386.15 on the over-the-counter spot market on
volumes in excess of $14.5 million.

Dollar shortages have plagued the country for months after sharp falls in
the price of oil, Nigeria’s main export.

The central bank also directed lenders to stop processing letters of credit
for imports for third-party suppliers or brokers with immediate effect,
another measure to try to curb demand and stabilise the currency.

TANZANIA

Tanzania’s shilling is expected to gain slightly next week due to
anticipated inflows of dollars from agricultural commodity exports.

Commercial banks quoted the shilling at 2,315/2,325 on Thursday against the
dollar, the same levels recorded a week ago.

UGANDA

The Ugandan shilling is seen trading in a stable range over the coming days
helped by hard currency inflows from exports of commodities like coffee.

At 1011GMT commercial banks quoted the shilling at 3,670/3,680, compared to
last Thursday’s close of 3,667/3,677.

The latest coffee export figures show the east African country’s shipment of
the beans rose by 17.2% year-on-year in July and was the highest monthly
shipment since 1991.

 <mailto:info at bulls.co.zw> 

GLOBAL MARKETS

Shares fall, dollar rises as markets wait for dovish Fed hints

(Reuters) - Stocks fell on Thursday and the dollar was up after two days of
losses, as investors looked ahead to the U.S. Federal Reserve Chair’s speech
at the virtual Jackson Hole conference, at which he could signal tolerance
for higher inflation.

Wall Street hit new record highs on Wednesday and the MSCI world share index
also rose to its highest ever, with the endless supply of cheap cash from
central banks pushing up big-cap tech companies.

But the rally petered out in the Asian session, with an element of caution
coming from the United States sanctioning China over military action in the
disputed South China Sea.

Market focus is squarely on the virtual Jackson Hole conference, where
Federal Reserve Chair Jerome Powell is expected to drop policy hints when he
speaks at 0910 EDT (1310 GMT).

The MSCI world equity index, which tracks shares in 49 countries, was down
0.1% on the day at 1049 GMT, while the MSCI’s main European Index was down
0.3%.

The pan-European STOXX 600 was down 0.2%, while U.S. stock index futures
dipped, with U.S.-China tensions dampening the mood.

CMC Markets UK analyst David Madden said the week’s pattern was a classic
case of “buy the rumour, sell the fact” as investors unwound their bullish
positions from earlier in the week.

The Fed has already cut interest rates to zero, started bond-buying and
approved a massive lending programme.

Its balance sheet has expanded by as much as $3 trillion since the start of
the pandemic - far more than that of the European Central Bank and Bank of
Japan.

The dollar ticked up after two consecutive days of falling. Against a basket
of currencies, it was up 0.1% at 92.955.

The riskier Aussie and Kiwi dollars gained versus the U.S. dollar, while the
euro was slightly lower at $1.18055.

Australia’s Victoria state — epicentre of the nation’s second wave of
COVID-19 infections — reported its lowest one-day rise in new cases in
nearly two months.

The offshore Chinese yuan hit a 7-month high versus the dollar overnight,
but erased losses as the European session progressed.

European bond yields fell, with Germany’s benchmark 10-year Bund yield down
4 bps at -0.451%.

Oil prices were mixed, with Brent crude futures for October, which expire on
Friday, up 0.1% at $45.61 a barrel by 1055 GMT. U.S. West Texas Intermediate
(WTI) crude futures were down 0.4% at $43.21 a barrel.

Hurricane Laura, a massive hurricane in the Gulf of Mexico, has pushed the
market higher this week, but the storm is not expected to affect supplies
much because oil and product inventories are high.

Gold prices fell as investors took profits before Powell’s speech, with spot
gold down 0.8% to $1,938.68 per ounce by 1056 GMT.

Also in focus is the Republican National Convention. U.S. President Donald
Trump will speak live from the White House on Thursday.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Chalco H1 profits dive, aluminium output slips back behind Rusal

(Reuters) - Aluminum Corp of China Ltd , or Chalco, said on Thursday profits
fell 95% year-on-year in the first half due to lower aluminium and alumina
prices, while its primary metal production slipped just below that of
Russian rival Rusal.

Chalco, a listed arm of state-owned aluminium firm Chinalco, reported net
income of 35.71 million yuan ($5.19 million) in January-June, down from an
adjusted 707.41 million yuan a year earlier, according to a filing to the
Shanghai Stock Exchange. Last year’s first-half income was boosted by a
substantial gain on an asset sale, exacerbating the drop in earnings this
year.

The six-month net income figure implies a profit of only 5 million yuan for
the second quarter, which would mark Chalco’s worst quarterly result since a
net loss in the fourth quarter of 2018, according to Refinitiv Eikon data.

In terms of production, Chalco said first-half primary aluminium output was
1.86 million tonnes. That was down slightly from 1.89 million tonnes
reported a year earlier and below Rusal’s 1.87 million tonnes.

Chalco overtook here Rusal as the world's second-biggest listed aluminium
producer in 2018.

Parent Chinalco, which is not listed itself but also controls Yunnan
Aluminium, is now the world’s top producer by capacity, followed by China
Hongqiao Group .

Meanwhile, Chalco’s production of aluminium raw material alumina rose 5.74%
in January-June year-on-year to 7.2 million tonnes.

The company shut down three alumina production lines in July due to low
prices.

Overall first-half revenues fell 11.5% to 84.11 billion yuan as Chalco said
Shanghai aluminium prices averaged 4.3% lower year-on-year at 13,191 yuan a
tonne, but noted a rebound in the third quarter.

After a coronavirus-driven collapse in early 2020, Chinese demand has
recovered dramatically and Shanghai aluminium prices last week hit their
highest since April 2018 at almost 15,000 yuan, painting a much rosier
outlook for Chalco in the second half of the year.

$1 = 6.8845 Chinese yuan renminbi 

Gold dips as investors await Powell speech

(Reuters) - Gold fell on Thursday as investors reassessed their positions,
booked profits after a more than 1% jump in the previous session and
anticipated fresh stimulus announcements from U.S. Federal Reserve Chairman
Jerome Powell.

Spot gold was down 0.7% at $1,940.77 per ounce by 1138 GMT, after rising
1.3% on Wednesday. U.S. gold futures were down 0.2% to $1,949.30 per ounce.

Powell is scheduled to discuss the Fed’s annual conference of central banks
at 1310 GMT, with investors watching for inflation and monetary policy
clues.

The Fed has cut interest rates to near zero and introduced unparalleled
measures to stimulate the coronavirus-hit economy, contributing to gold’s
28% rise this year.

Carsten Menke, analyst at Julius Baer, said gold prices might see only
“momentary volatility” when Powell speaks.

Lower interest rates minimise the opportunity cost of owning non-yielding
bullion and weigh on the dollar, rendering gold cheaper for buyers
transacting in other currencies.

Gold also benefits as a perceived hedge against possible inflation and
currency debasement triggered by the money-printing by global central banks
to ease the economic blow from the pandemic.

The metal’s latest retreat came despite a cautious mood in European equity
markets ahead of the Fed’s Jackson Hole virtual conference.

Elsewhere, silver was down 0.8% to $27.29 per ounce, palladium was off
nearly 1% at $2,176.30 and platinum was up 0.4% to $932.88 per ounce.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

SeedCo

AGM

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

28 August 2020 | 9am

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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
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opinions expressed and recommendations made are subject to change without
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