Bulls n Bears Daily Market Commentary : 20 July 2020

Mon Jul 20 16:17:25 CAT 2020

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Bulls n Bears Daily Market Commentary : 20 July 2020

 <mailto:info at bulls.co.zw> 

<https://www.renaultzimbabwe.com/cars/kwid/index.html?utm_source=newsletter&
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talcorp-jul20> ZSE commentary

Finance Minister shares more details regarding Vic Falls Exchange

Mthuli Ncube shared the mid-term budget review yesterday and in it is a
bunch of interesting updates and government’s plan to revive our ailing
economy. One of the projects announced with intent to help government get
its paws on foreign currency is the Victoria Falls Exchange (VFEX).

The securities exchange was launched to in order to attract critical
offshore capital to the economy. Details of the VFEX have been shared to the
public in tiny pieces and before yesterday’s budget review we knew the
following;

VFEX will be managed by Zimbabwe Stock Exchange;

§  ZSE CEO Justin Bgoni suggested those dealing with VFEX will be subject to
different rules when it comes to taxation and repatriation of funds i.e
participants are likelier to get tax concesisons and it will be easier to
move money out of the country;

§  The exchange will have listings mainly from the mining sector;

§  ZSE is working with the RBZ and the government on a framework for
repatriation of funds for foreign investors;

What’s new?

In the 2020 mid-term budget, the Victoria Falls Exchange was referenced
again and this time the following details were revealed;

The VFEX will thus be operated from the central business district of
Victoria Falls, and will seek to partner any exchanges or international
investment banks;

In addition to this there is mention of “government incentives” which are
not fully explained as follows:

Exemption from Corporate Income Tax for the VFSE;

Exemption from Capital Gains Withholding Tax on disposal of shares listed on
the VFSE; and;

A lower rate of 5% on dividends payable to non-resident investors on the
VFSE.-Techzim

Global Currencies & Equity Markets

South Africa

S.African rand slips as weak China data overshadows vaccine hope

(Reuters) - South Africa’s rand weakened on Thursday, pausing a recent rally
to one-month highs as disappointing Chinese consumption data dampened
investor hopes of a quick economic recovery from the COVID-19 pandemic.

At 1500 GMT, the rand was 0.3% weaker at 16.6500 per dollar, compared with
the previous session’s best of 16.5075.

Wednesday’s rally, across most emerging market assets, was spurred by
progress in finding a COVID-19 vaccine by U.S. firm Moderna, whose
experimental shot showed it was safe and provoked immune responses in all 45
healthy volunteers.

But China’s unexpected drop in retail sales - for a fifth straight month -
saw some investors rush back to safe-haven assets.

The rand has been at the mercy of global sentiment for the past few weeks,
pulling away from the key 17.00 technical level despite South Africa’s
creaking economy and strained finances.

On Thursday, South Africa’s government committed to secure funds for the
overhaul of struggling state-owned South African Airways (SAA), which
requires at least 10 billion rand ($600 million).

SAA is among a group of state firms in need of additional state bailouts,
with the pandemic adding to existing problems.

Stocks were mostly unchanged after deteriorating U.S.-China relations
dampened global risk appetite.

The FTSE/JSE All Share Index fell 0.25% to 55,808 points, while the FTSE/JSE
Top 40 Companies Index ended down 0.47% at 51,363 points.

Retailer TFG Limited fell 4.9% to 69.27 rand after it priced its rights
issue at 41% discount.

Bonds were firmer, with the yield on the benchmark 2030 government issue
down 2.5 basis points to 9.35%

 <mailto:info at bulls.co.zw> 

GLOBAL MARKETS

Euro, euro zone bond markets hold out hope for recovery fund; stocks higher

(Reuters) - The euro and euro zone bond markets held out hope European Union
leaders would strike a deal on a recovery fund for the bloc’s
pandemic-ravaged economy on Monday, while the region’s stock markets inched
cautiously higher as talks paused.

The single currency hit its highest levels against the dollar since March 9,
at $1.1467 after reports of progress following three days of negotiations
towards the proposed 750 billion-euro fund.

Bond markets also cheered the progress, with the risk premium investors pay
for holding Italian government debt over Germany’s - the bloc’s benchmark -
falling to 161 basis points, its lowest level since March 27.

Stock markets were more reserved in their optimism, however. The
pan-European STOXX 600 index was 0.1% higher by mid-morning trade in London,
with a risk-off tone expressed in sectoral gainers and losers.

Talks on the fund were adjourned on Monday until 1600 CET (1400 GMT). After
the adjournment was announced, both the Austrian Chancellor Sebestian Kurz
and Dutch Prime Minister Mark Rutte said progress was being made.

A group of wealthy northern European states pushed during the summit for a
smaller recovery fund and sought to limit how payouts are split between
grants and repayable loans.

An attempt to reach a compromise failed on Sunday. A deal envisaging 400
billion euros in grants - down from a proposed 500 billion euros - was
rejected by the north, which said it saw 350 billion euros as the maximum.

Discussions over the grants has since narrowed, with EU summit Chairman
Charles Michel saying they would be based on 390 billion euros combined with
smaller rebates.

They added that they expected the euro to rise in the second half of 2020 as
economies bounce.

Wall Street futures traded 0.2% lower.

Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan
gained 0.26%, reversing loses earlier in the day.

Chinese markets rose more than 2% after regulators raised the equity
investment cap for insurers and encouraged mergers and acquisitions among
brokerages and mutual fund houses.

Australia’s S&P/ASX 200 index dropped 0.5% after authorities warned that a
surge in COVID-19 cases in the country’s second most populous state could
take weeks to tame.

More than 14 million people have been infected by the novel coronavirus
globally and nearly 602,000 have died, according to a Reuters tally.

South Korea’s KOSPI pared gains to fall 0.1%. Japan’s Nikkei was also down
0.1% after data showed the country’s exports suffered a double-digit decline
for the fourth month in a row in June.

In the United States, Congress is set to begin debating a new aid package
this week, as several states in the country’s South and West imposed new
lockdowns to curb the virus.

The virus has claimed over 140,000 U.S. lives since the pandemic started,
and Florida, California, Texas and other southern and western states shatter
records for new cases every day.

In currencies, the dollar climbed 0.2% against the Japanese yen to 107.22.
Sterling gained 0.2% to trade at $1.2589. The risk-sensitive Australian
dollar was down 0.1% at $0.6989.

In commodities, spot gold traded flat at $1,809.58 an ounce, still near a
nine-year top.

Oil prices fell, unnerved by the prospect of rising coronavirus cases
halting a recovery in fuel demand. U.S. crude and Brent were both down 1%
each to $40.14 per barrel and $42.71 per barrel, respectively.

Prices for copper, a barometer of economic growth, fell on Monday after data
showed rising inventories in Chinese warehouses and on concern the climbing
coronavirus cases threatened a sustainable global recovery.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold steady, Oil and Base Metals trade lower

On Monday, gold remains steady above 1800 on weak USD. Spot Gold was down
0.22% at $1,806 whereas COMEX Gold Futures was trading down 0.13% at $1,807
per troy ounce.

MCX Gold prices moved above 50 EMA on the hourly chart. The hourly RSI is in
a bullish crossover. On the lower end, support seen at 48550, while on the
higher end, resistance seen at 49050.

Oil 

On Monday, oil trades lower as resurgence of coronavirus has overshadowed
the global demand for oil. West Texas Intermediate (WTI) crude was down
0.49% at $40.53 whereas Brent crude was down 0.53 at $42.91.

MCX Crude oil prices remained sidewards. The hourly RSI is in a bullish
crossover. On the lower end, support seen at 2970 while on the higher end,
resistance seen at 3160.

Base Metals

On Monday, base metals were trading with a negative bias. On London Metal
Exchange (LME), Aluminium was down 0.21% at $1,660 whereas Copper was down
0.65% at $6,399. Zinc was down 0.60% at $2,168 while Lead was down 0.45% at
$1,805.

MCX Copper  prices moved higher but found resistance around a past swing low
on the hourly chart. The hourly RSI remains flat. On the lower end support
seen at 494 while on the higher end, resistance seen at 504.—indiainfoline

Metals on back footing

Markets were mixed across the board this morning, Monday July 20, with
traders focused on the prospects for a recovery fund from the European
Union, while the weak Japanese export data highlights the economic damage
that Covid-19 has dealt.

Base metals

Three-month base metals prices on the London Metal Exchange were mixed this
morning; nickel stood out with a 0.8% gain to $13,220 per tonne and zinc was
down by 0.2% at $2,177 per tonne, while the rest were little changed with
copper off by 0.1% at $6,432.50 per tonne.

The most-traded base metals contracts on the Shanghai Futures Exchange were
mostly more active and generally weaker with the complex down by an average
of 0.5%. August aluminium was the only one in positive territory, it was up
by 1%, while August copper was down by 0.1% at 51,400 yuan ($7,350) per
tonne and the rest were down by an average of 1%.

Precious metals

Spot gold prices were little changed this morning, compared with Friday's
close; prices were recently quoted at $1,810.30 per oz, but were up by some
$10 per oz from where they were at a similar time on Friday morning. There
appears to be considerable resistance on the chart between $1,813.50 and
$1,818 per oz.

Silver ($19.31 per oz) was down by 0.1%, platinum ($839.70per oz) was up by
0.3% and palladium ($2,032.50 per oz) was up by 0.8%, compared with Friday’s
closes.

Wider markets

The yield on US 10-year treasuries was at 0.62% this morning, compared with
0.61% at a similar time on Friday morning.

Asian-Pacific equities were mixed this morning: the Hang Seng (+0.14%), the
CSI 300 (+2.82%) and the Nikkei (+0.09%), while the ASX 200 (-0.53%) and the
Kospi (-0.14%) were weaker.

Currencies

The US dollar index is testing support and was recently quoted at 95.97, the
low on June 10 was 95.71. It is looking vulnerable, if it breaks lower then
that could support the likes of gold.

The euro (1.1450) was gaining ground against the dollar, while the other
major currencies were consolidating: the Australian dollar (0.6988),
sterling (1.2561) and the yen (107.23).

Key data

Monday’s economic agenda is light, data out already showed Japanese exports
disappointed on the downside as did German producer price index that was
flat, having been expected to rise 0.2%.

There is a German Bundesbank monthly report out today and the EU economic
summit has been extended so there can be more discussions on Monday.

In addition, UK Monetary Policy Committee members Andy Haldane and Silvana
Tenreyro are speaking.

Today’s key themes and views

The base metals are drifting lower in a controlled manner after strong
upside runs in recent weeks, which suggests light profit-taking. The metal
holding up the best is tin.

We wait to see if the halt in the rise turns into more of a sell-off. Even
if it does, we expect dips will be supported because Covid-19 production
disruptions, potential for Chinese stockpiling, promises of infrastructure
spending and institutional investor access to cheap financing may be enough
to offset the demand hit seen in recent months. But a pullback in equities
could lead to some further weakness in the short term.

Gold prices once again pulled back on Thursday but rebounded on Friday and
are now poised below resistance. With the dollar looking weaker, gold may
well get another boost. We expect the bull market to continue given the
state of uncertainty.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

Masimba

AGM

Virtual

21 July 2020 | 12pm

Proplastics

AGM

Virtual

23 July 2020 | 10am

NMB

AGM

Virtual

28 July 2020 | 10am

FMP

AGM

Ground Floor, First Mutual Park, 100 Borrowdale Road, Borrowdale

29 July 2020 | 9:30am

FML

AGM

Ground Floor, First Mutual Park, 100 Borrowdale Road, Borrowdale

29 July 2020 | 11:30am

ZBFH

AGM

Board Room, 21 Natal Road, Avondale

30 July 2020 | 10:30am

OK Zimbabwe

AGM

Virtual

30 July 2020 | 3pm

ZHL

AGM

virtual

31 July 2020 |

Delta

AGM

Virtual, Head Office, Northridge Close, Borrowdale

31 July 2020 | 12:30pm

Zimbabwe

National Heroes Day

Zimbabwe

10  August 2020

Zimbabwe

Defence Forces’ Day

Zimbabwe

11  August 2020

CBZ

AGM

Virtual

14  August 2020 | 6pm

 <mailto:info at bulls.co.zw> 

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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Bulls n Bears 

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