Bulls n Bears Daily Market Commentary : 28 January 2020

Wed Jan 29 09:30:29 CAT 2020

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Bulls n Bears Daily Market Commentary : 28 January 2020

 <http://www.nicozdiamond.co.zw/> 

Zimbabwe Stock Exchange Update

Market Turnover ZWL$27,906,410.75 with foreign buys at ZWL$6,267,847.00 and
foreign sales were ZWL$483,243.00 Total trades were 164

The All Share index continues its winning streak by adding 11.03 points to
close at 264.60 points. OLD MUTUAL LIMITED led the movers with a huge jump
of $1.0414 to $40.5397, MEIKLES rose by $0.5499 to $3.6499 and PADENGA
traded $0.4961 firmer at $2.9875. PPC also gained $0.1679 to close at
$4.7954 and INNSCOR was $0.1636 stronger at $3.8764.

Trading in the negative was DAWN PROPERTIES which eased $0.0185 to $0.0750
and BINDURA which traded $0.0036 lower at $0.2002.

  Global Currencies & Equity Markets

Uganda

Ugandan shilling unchanged as banks, importers stay on sidelines

(Reuters) - The Ugandan shilling traded in the same position on Tuesday,
amid subdued appetite for hard currency from both commercial banks and
merchandise importers.

At 0933 GMT commercial banks quoted the shilling at 3,675/3,685, same level
as Monday’s close.

South Africa

S.Africa's rand, bonds recover slightly from virus-related selloff

(Reuters) - South Africa’s rand clawed back losses on Tuesday, firming
slightly alongside local bonds as a selloff triggered by the spread of the
coronavirus was halted by technical factors curbing big movements in either
direction.

At 1530 GMT the rand was 0.14% firmer at 14.5850 per dollar, back from a
slide to 14.7120, its weakest in two months, with emerging markets engulfed
by risk aversion as the outbreak of virus in China reactivated fears for
global growth.

The rand’s run beyond the 14.60 technical level did not last as buyers
returned, although some traders warned the recovery could be temporary as
investors continue to assess opportunities and the impact of the
coronavirus.

Global stock markets and oil prices tumbled in recent days on fears the
virus could further damage China’s already weakened economy, a key trade
partner particularly to commodity producers like South Africa.

News that a state-owned bank would give cash-strapped South African Airways
(SAA) 3.5 billion rand ($244 million) of emergency funding to keep operating
while it wraps up its business rescue process also soothed investor
concerns.

Bonds also recovered, with the yield on the benchmark 2026 issue down 6
basis points to 8.085%.

Stocks closed down slightly, with the Johannesburg Stock Exchange’s Top-40
index 0.3% lower at 49,800 points and the broader all-share index down 0.28%
to 55,748 points.

Blue Label Telecoms was the biggest loser of the day, falling 13.5% after it
said South Africa’s third largest mobile carrier Cell C, in which it is the
largest shareholder, had defaulted on a host of debt payments. 

Asia

Asian shares, bond yields fall as deadly coronavirus spreads

(Reuters) - Asian shares slipped again on Tuesday as China took more drastic
steps to combat the coronavirus, while bond yields fell globally on
expectations central banks would need to keep stimulus flowing to offset the
likely economic drag.

As the death toll reached 81 and the virus spread to more than 10 countries,
including France, Japan and the United States, some health experts
questioned whether China can contain the epidemic.

Beijing has already extended the Lunar New Year holiday to Feb. 2
nationally, and to Feb. 9 for Shanghai. On Tuesday, the country’s largest
steelmaking city in northern Hebei province, Tangshan, suspended all public
transit in an effort to prevent the spread of the virus.

With Chinese markets shut investors were selling the offshore yuan and the
Australian dollar as a proxy for risk.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.4% lower in
early Asian trading on Tuesday. Australian shares stumbled nearly 1%.

On Monday, key indexes for British, French and German equity markets slid
more than 2%, as did pan-European markets on worries about the potential
economic impact from the deadly virus. Stocks on Wall Street fell more than
1%.

E-Mini futures for the S&P 500 held near three-week lows after slumping 1.6%
overnight for their biggest single day percentage loss since last October.

Analysts at JPMorgan said the coronavirus outbreak was an “unexpected risk
factor” for markets though they see the contagion as a regional rather than
a global shock.

Treasury 10-year note yields dived as deep as 1.60%, the lowest since Oct.
10. Yields on two-year paper also fell sharply while Fed fund futures
rallied as investors priced in more risk of a rate cut later this year.

Futures imply around 35 basis points of easing by year end . The Federal
Reserve is widely expected to stand pat at its policy meeting this week, but
markets will be sensitive to any changes to its economic outlook.

JPMorgan said they have not yet altered their developed or emerging markets
forex forecasts though they were taking profits on their “bullish” EUR/USD
positions and remain “considerably long” on Swiss francs which benefits from
safe-haven demand. Short build-up in the Aussie was another risk hedge.

In the currency market, the dollar index added 0.1% to 97.948 led by
safe-haven demand. The euro was steady at $1.1019.

The yen, which has been rising for the past five sessions, paused at 108.12
per dollar. The Aussie also steadied after posting its biggest one-day
percentage loss in three weeks on Monday.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Copper crashes as virus chills the China recovery story: Andy Home

(Reuters) - The outbreak of the deadly coronavirus in the Chinese city of
Wuhan has hit industrial metals hard.

The London Metal Exchange’s (LME) index of base metal prices has plunged 7%
since the first reports of the virus started dominating the headlines just
over a week ago.

Copper has been savaged.

LME copper has slumped 10% from a Jan. 16 high of $6,343 per tonne to a
current $5,715, wiping out all the gains made since the start of December.
It is now trading near lows last seen in October.

The slump has been accentuated by the loss of liquidity from Chinese
markets, closed for the Lunar New Year holidays. The LME chart picture shows
copper “gapping” lower over the weekend, an increasingly rare phenomenon for
a globally-traded commodity.

As ever Doctor Copper is paying the price of his popularity with the broader
investment universe as the risk-off trade courses through global markets.

However, there is also logic in the panic as the copper market collectively
reassesses the Chinese industrial recovery story expected in 2020.

A NEW YEAR OF RECOVERY...

The Chinese New Year of the Rat was supposed to herald a rebound in the
country’s manufacturing sector, lifting demand across the metallic spectrum.

China’s factory activity had been showing encouraging signs of picking up
after months of protracted weakness.

The Caixin purchasing managers index (PMI), which is weighted towards
smaller and medium-sized companies, moved into growth-positive territory in
August. The official PMI, covering larger companies, followed in November.

Both trends were expected to gather momentum after the Chinese holiday,
helped by the “Phase 1” trade deal between the United States and China.

The combination of manufacturing recovery and tariffs truce saw funds
increasingly buy into the copper story over the course of December.

Money managers turned net long of the CME copper contract at the start of
the year and were still long to the tune of 7,269 contracts as of the last
Commitments of Traders Report. (COTR)

However, the latest COTR is a snapshot on positioning early last week before
the spread of the virus started spooking global markets.

It’s a fair bet that the build of fund long positions has gone sharply into
reverse.

It has certainly been happening in the London market, where speculative long
positioning on copper has shrunk from 17% of open interest on Dec. 30 to a
current 2.5%, according to LME broker Marex Spectron.

...IS NOW POSTPONED

The shift in positioning points to a collective double-take on copper’s
fortunes this year as Chinese authorities lock down every larger numbers of
people to contain the virus.

Calculating that economic cost is still very much work in progress as ever
more Chinese companies and exchanges push back the post-holiday return to
work.

Analysts are looking for clues in the history books.

The SARS virus outbreak in 2003, also in China, had a significant but
short-lived impact on the country’s economy.

Analysts at Capital Economics note that “back then the Goldman Sachs
Commodity Price index initially shed more than a tenth of its value, but
this loss was fully recovered a few months after the disease was brought
under control in July 2003.” (“Coronavirus highlights fragility of price
recovery,” Jan, 24, 2020).

The difference between then and now is both the size of the Chinese economy,
which has grown to dominate metals supply chains, and its recent fragility.

The manufacturing slowdown appeared to be ending.

Citi was expecting a significant rebound in economic activity and metals
demand this year predicated on China’s “strong credit impulse over the past
3-6 months”.

But the bank now thinks that any recovery “has been put on hold for at least
the coming month, and for up to 3-4 months.”

Chinese demand, in short, “is expected to remain extremely weak for 4-6
weeks”.

MORE STIMULUS?

Citi’s view is that Chinese industrial recovery has been postponed not
cancelled.

And others agree.

Capital Economics is not changing its base metals price forecasts for now,
arguing “a more convincing rebound in prices will come later this year, as
global growth gradually gathers pace.”

There is also the question of how Beijing reacts as the virus causes
multiple hits on an already struggling economy.

The government’s growth target of around 6% this year is, according to BMO
Capital Markets, “likely non-negotiable in order to meet the doubling of per
capita GDP promised by President Xi in 2020 versus 2010.” (“Metals Brief”,
Jan. 27, 2020)

If consumption weakens, as seems inevitable over the coming weeks, the
Chinese authorities will be tempted to revert to fixed asset investment
stimulus to compensate, argues BMO analyst Colin Hamilton.

Beijing may have increasing reservations about using construction and
infrastructure investment to boost broader economic growth but they are both
tried-and-tested channels for central government stimulus.

MORE VOLATILITY?

It will take weeks, perhaps longer, for a clear picture to emerge of the
economic havoc wreaked by the coronavirus.

In the interim, copper and, to a greater or lesser extent, the other LME
metals are going to remain slaves to the headlines.

Equally, the absence of such positive news but rather a steadily rising
death toll will be clearly bearish.

In the Chinese zodiac the rat is an animal with a reputation for being
intelligent and quick-witted.

Copper players are going to have to be both in the weeks ahead. They look
set to be turbulent times.

Gold eases off 3-week peak as equities sell-off pauses

(Reuters) - Gold edged down on Tuesday from the previous session’s near
three-week high as equities regained some ground, but concerns the
coronavirus outbreak could impact the global economy cushioned safe-haven
bullion’s losses.

Spot gold was down 0.2% to $1,578.13 per ounce as of 1202 GMT, having
touched its highest since Jan. 8 on Monday. U.S. gold futures were steady at
$1,577.40.

European markets rebounded early after the previous day’s thumping, while
the U.S. dollar rose to a near two-month high.

However, concerns the coronavirus outbreak could hinder the global economy
persist, Menke said, adding reactions to the spreading virus had been very
different across markets and the decline in oil prices suggested a slowdown
of economic activity in China.

Gold is seen as a safe-haven during times of economic and political
uncertainties.

The death toll from the virus reached 106 in China and some health experts
questioned whether Beijing can contain the virus which has spread from the
city of Wuhan to more than 10 countries.

The outbreak has prompted authorities to impose travel restrictions and
extend the Lunar New Year holidays, which helped bullion to rise for the
past four sessions.

Benchmark U.S. 10-year Treasury yields fell to their lowest since Oct. 10.
Government bonds are also considered a safe-haven asset during times of
economic and political uncertainty.

Also on investors’ radar was the U.S. Federal Reserve’s first policy meeting
of the year, scheduled to start later in the day. Fed Fund futures show
traders expect the U.S. central bank to keep interest rates unchanged.

Lower interest rates reduce the opportunity cost of holding non-yielding
bullion.

Elsewhere, palladium jumped 1.1 % to $2,292.89 an ounce, having declined
about 7% in the previous session.

Silver fell 0.7% to $17.96, while platinum rose 0.1% to $983.98. 

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

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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
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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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