Bulls n Bears Daily Market Commentary : 31 August 2020

Mon Aug 31 16:35:19 CAT 2020

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Bulls n Bears Daily Market Commentary : 31 August 2020

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ZSE commentary

Steady gains in month ending trades…

The market was in the black in month-ending session with all the indices we review closing pointing northwards. The mainstream All Share Index put on 2.44% to 1389.22pts with the Industrials adding 2.06% to close 4533.79pts. The ZSE Top Ten Index was 1.71% firmer at 913.71pts on firming demand in selected heavies. Twenty counters gained against four fallers as four remained stable in a session where twenty-eight counters were active. Banking group FBC topped the risers set after a 20% rebound to see it closing at $9.0000 on scrappy shares. Tyre manufacturer NTS followed on a 19.92% surge that took its price to $15.9500 on firming demand. Insurer Fidelity was 19.90% firmer at $0.4700 while, Powerspeed added 19.89% to end at $1.5825. Nickel miner Bindura recovered 17.70% to settle at 3.9518, having reached a high of $4.0000. Other gains were registered in Simbisa, Delta, CBZ and OKZIM.

Losses for the day were led by General Belting which declined 20% to $0.1200 while, FML eased 3.31% to settle lower at $3.5000. ZHL was 2.17% down at $2.2500 to complete the losers list. Activity aggregates declined in the month end session with the volumes exchanged declining 22.27% to 6.07m shares while, turnover dropped 30.89% to $53.95m. Innscor was the most liquid counter of the day as it anchored both the volumes and values after claiming 24.23% and 47.71% respectively. The Other notable trade was in Seedco which added 11.45% of the value outturn. Capital flight continued in month end session with inflows accounting for a mere 4.45% of the day’s turnover while, outflows claimed 56.05% of the same.-efesecurities

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Global Currencies & Equity Markets

South Africa

S. Africa Rand Slips as Political Risk Returns to Traders’ Radar

South African 100 rand banknotes stand in this arranged photograph in Pretoria, South Africa, on Wednesday, Aug. 14, 2019. The rand ended a tumultuous week on a positive note, gaining against the dollar for a second day and heading for its first weekly advance in four as technical indicators suggested recent declines are overdone.

South African 100 rand banknotes stand in this arranged photograph in Pretoria, South Africa, on Wednesday, Aug. 14, 2019. The rand ended a tumultuous week on a positive note, gaining against the dollar for a second day and heading for its first weekly advance in four as technical indicators suggested recent declines are overdone. , Bloomberg

South Africa’s rand weakened after President Cyril Ramaphosa had to stave off a leadership challenge from party rivals opposed to his efforts to curb corruption and implement economic reforms.

The rand slipped as much as 0.9%, leading emerging-market currency declines against the dollar. Implied volatility jumped the most in almost a month, suggesting options traders anticipate wider swings in coming weeks.

South Africa’s government is battling to revive an economy that was mired in recession before the coronavirus outbreak and which the Treasury expects to contract more than 7% this year. Ramaphosa’s efforts to stem corruption have been undermined by a faction of the ruling African National Congress that’s backed by his predecessor Jacob Zuma, who was ousted in 2018 amid allegations of graft.

South Africa lost its last investment-grade credit rating when Moody’s Investors Service downgraded its assessment in March. That added fuel to a selloff of the country’s bonds, with net outflows reaching a record 59 billion rand ($3.5 billion) on Aug. 28.

The rand was 0.7% weaker at 16.7138 per dollar by 1:35 a.m. in Johannesburg, paring its advance this month to 2.1%. Yields on benchmark 10-year government bonds dropped two basis points to 9.29%.-Bloomberg L.P.

Nigeria

Bank of America sees Nigeria’s currency depreciating to N430/$

Nigeria's currency is in the grip of tough external pressure, with internal foreign exchange shortages, and black market rates that have hit 475 naira to the dollar.

Nigeria’s current foreign exchange pressure that is likely to gain momentum in 2021 as the economy and imports recover will trigger a future adjustment of the nation’s currency to N430/$ next year, Bank of Africa analysts Rukayat Yusuf and Andrew MacFarlane said in its the global bank’s latest report looking at Nigeria’s FX unification and shortages.

Back in March, analyst Aly-Khan Satchu had argued, “The naira is gone. It’s just a question of when”.

The bank revised its previous naira/dollar forecast to 390/$1 by year-end from 430/$1 with foreign reserves at $28bn from $22bn on higher oil prices, lower imports and its expectations of a $1.5bn of World Bank loans expected to arrive Nigeria in October.

The CBN devalued its official exchange rate from N360/$1 to N379/$1, in what the Governor Godwin Emefiele said is close the gap with unofficial rates in the country.

The July devaluation followed a March cut in the value of the country’s naira triggered by the height of global market volatility, when the price of oil, Nigeria’s key export, collapsed. The country’s official exchange rate was devalued from N307/$1 to N360/$1 at the time.

Despite the unification move by the apex bank, the naira trades at over 470 to the dollar on the black market, prompting analysts to see the value of the naira sliding further. Goldman Sachs analysts earlier in the month said they see the naira dipping to 500 to the dollar in a “reasonable target” of a year on “high and sticky” inflation in the country, as well as persistent outflows from official reserves.

The deepening gap between official and informal naira rates is seen by analysts as a sign of decreasing shortages of foreign exchange, something the CBN is trying to curb with multiple policies targeted at stopping the bleed.

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EMERGING MARKETS

Turkish lira near record low as output plunges, Asia FX firms

(Reuters) - The lira hovered near record lows on Monday as data showed the Turkish economy shrank at its fastest pace in more than a decade due to the COVID-19 pandemic, while Asian currencies firmed following upbeat services sector figures from China.

The lira eased 0.2% to 7.3511 against the dollar, trading just above its historic low of 7.4161, as gross domestic product fell 9.9% in the second quarter, although that was better than an 11.8% decline forecast by economists.

The currency has lost about 19% against the greenback this year - two years after a full-blown currency crisis - despite constant central bank intervention, and analysts said the decline would have been worse if historic stimulus by the U.S. ṅFederal Reserve had not pressured the dollar.

A wider index of emerging market currencies firmed 0.1% to hit its highest in nearly six months, as data showed China’s services sector expanded at a solid rate, recovering from the coronavirus shock.

The Chinese yuan looked set for its best month since January 2019, while the domestic blue-chip index climbed to an over five-year high.

The Indian rupee eased 0.7%, snapping a two-day winning streak ahead of figures likely to show the world’s fifth-largest economy suffered its largest quarterly slump on record.

In South Africa, the rand softened against the dollar as investors awaited details of the ruling African National Congress’s (ANC) weekend meeting, which began with opposing factions lashing out over corruption and leading to speculation over possible cabinet changes.

The Russian rouble bounced for a third straight session after a sell-off in the past few weeks that was driven by political risks related to the crisis in Belarus. The oil-linked currency is now on course to end the month with gains of about 1%, recovering from a 2% fall earlier in August.

Among stocks, natural gas giant Gazprom posted an over 50% plunge in second-quarter net income, but said energy markets were recovering from the impact of the pandemic. Its shares were little changed in morning trading.

A basket of emerging market stocks was down about 1%, led by a 0.8% fall in Turkey’s stock index, but still on course for its fifth straight monthly gain as aggressive global stimulus drives equity benchmarks back to their pre-pandemic highs.

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Commodities Markets

AngloGold Ashanti, Barrick Gold to sell 'Morila the gorilla' stakes

(Reuters) - AngloGold Ashanti and Barrick Gold will sell their effective 80% stake in the Morila Gold Mine in Mali, the miners said on Monday, as political crisis grips the West African nation after soldiers seized power in a coup.

Australian company Mali Lithium will buy the firm that holds the two miners’ stakes in the mine - the other 20% of which is owned by the government of Mali - for a fee estimated at between $22 million and $27 million, Barrick Gold and AngloGold Ashanti said.

Both miners said the deal would allow them to focus their capital or attention elsewhere, would extend the life of the mine and “benefit in-country stakeholders”. Neither mentioned the political situation in Mali.

Mali’s President Ibrahim Boubacar Keita resigned and dissolved parliament earlier in August, hours after soldiers held him at gunpoint and seized power in a coup.

The crisis caused the closure of the country’s borders, in a nation where miners typically fly their gold out to be refined.

It also raised the risk of further political turmoil in Mali, which, in common with other countries in the region, faces a growing threat from Islamist militants.

Barrick Gold said the mine, known in its heyday as “Morila the Gorilla”, had produced 6.9 million ounces of gold, generated more than $2.5 billion for its stakeholders in taxes and dividends, and served as its legacy firm’s base for expansion elsewhere in Africa. However it was forecast to close in 2021.

Mali Lithium said it was excited and privileged to acquire one of “West Africa’s great gold mines”.

It added it wants to ramp up operations at the mine as soon as possible.

The deal remains subject to Mali Lithium finding funding and the government of Mali allowing it to go through. The parties aim to complete the transaction by October.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

Invest Wisely!

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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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