Bulls n Bears Daily Market Commentary : 28 July 2020

Tue Jul 28 16:11:58 CAT 2020

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Bulls n Bears Daily Market Commentary : 28 July 2020

<https://www.renaultzimbabwe.com/cars/Koleos-HZG/koleos-hzg.html?utm_source=
newsletter&utm_medium=email&utm_term=&utm_content=pip&utm_campaign=newslette
r-faithcapitalcorp-jul20> ZSE commentary

Finance Minister has indicated that the ZSE will mostly likely open in by
the next few weeks. There is currently no clarity as to the reasons behind
delayed market opening.

Global Currencies & Equity Markets

Nigeria

Nigerian banks squeezed as central bank shores up naira

(Reuters) - Nigeria’s banks are expected to take a big hit to revenues and
face rising borrowing costs this year as central bank measures to support
the naira currency squeeze lenders already hit by fallout from coronavirus
and the oil price shock, analysts say.

Banks in Africa’s largest economy - a mainstay for equity and fixed income
frontier market investors - have learned to navigate challenges in a country
that has long struggled with dollar shortages and multiple exchange rates.

But the prospect of anaemic growth, dwindling oil revenues, declining
remittances and dollar shortages exacerbated by the central bank’s latest
action aimed at curbing naira liquidity and currency speculation are putting
pressure on lending by banks and the quality of existing assets.

The central bank has sucked as much as 900 billion naira out of the local
banking system since raising the cash reserve ratio (CRR) by 5% to 27.5% in
January, according to analysts’ calculations.

Those debits also hamper wider lending, going against central bank measures
of lowering banks’ loan to deposit ratios, she said. Central bank data
showed credit to the private sector in April dropped by nearly two-thirds
from end-2019.

He expects banks’ revenues to drop at least 20% this year, though he did not
expect any to make a loss.

Some banks have already indicated they expect a hit. In April, mid-tier
lender Fidelity Bank warned 2020 profits would drop by 15%.

Bankers said lenders were relying on existing customers to weather the storm
as new lending looked risky with the economy expected to tip back into
recession.

Fitch predicts impaired loan ratios will rise sharply in 2020 with Nigerian
banks the most exposed to stress in the oil sector compared to their peers
in emerging markets elsewhere.

Nwadialor at Tellimer expected a “significant pick-up” of non-performing
loan ratios from 6.6% in the first quarter to an average of 10% for the full
year - double the central bank’s benchmark.

Some banks have already announced plans to tackle this. Mid-tier lender FCMB
plans to complete a restructuring of half its loan book at the end of April.
A central bank policy maker predicted last month that banks would
restructure over a third of loans.

Moody’s warned in a note that dollar shortages would intensify over the next
12-18 months - a period when 49% of banks’ $7 billion foreign-currency
borrowing matures, leaving them vulnerable.

Yields on dollar bonds issued by Nigerian banks - a proxy for borrowing
costs - have retreated from the peaks scaled in the midst of the oil and
coronavirus rout. Yet for lenders such as Zenith Bank, Fidelity Bank or
Access Bank, the yields are still at least double the level from mid-March.

Sudan

Sudan to begin currency adjustment in August

(Reuters) - Sudan will begin a currency adjustment program in August, aiming
to reach a full currency float in two years, a source told Reuters on
Wednesday.

The private sector will be allowed to import fuel using dollars at the free
market price in August as well, the source said. These reforms come as part
of the 2020 budget to be formally passed by Sudan’s cabinet and sovereign
council, acting in parliamentary capacity within days, the source said.

 <mailto:info at bulls.co.zw> 

EMERGING MARKETS

Currencies rise on back of weaker dollar; S.African rand firms

(Reuters) - Emerging market currencies started the week on a firmer footing
on Monday, with the high-yielding South African rand leading gains as the
dollar weakened on growing bets of a more accommodative stance from the U.S.
Federal Reserve this week.

The reserve currency of the world slipped against a basket of currencies,
with focus shifting to a two-day Fed meeting starting on Tuesday.
Expectations are that policymakers may begin laying the groundwork for more
action in September or the fourth quarter.

Analysts note that the move in the dollar may not be a clear signal of a
“risk-on” mood as worsening ties between the United States and China, and
surging coronavirus cases continue to dominate headlines.

Concerns over renewed restrictions to curb the spread of the coronavirus in
parts of Asia also kept risk in check, with Beijing battling the most
aggressive resurgence in months, Australia recording a record daily rise in
cases and Vietnam locking down the city of Danang.

South Africa’s rand rose 0.5% against the dollar, gaining the most among its
emerging market peers, with investors focusing on a slew of economic data
this week, including consumer price inflation on Wednesday and trade data on
Friday.

Turkey’s lira also firmed after data showed business confidence among
Turkish manufacturers rose to 100.7 points in July compared to 92.6 points
in June. A score of 100 or more denotes optimism while a number below the
100 mark designates pessimism.

Russia’s rouble edged higher, even as the Bank of Russia on Friday cut its
benchmark interest rate by 25 basis points to a record low of 4.25%.
Analysts say the cut was by a lesser margin than expected.

Currencies in central and eastern European countries, including Hungary,
Poland, Romania and the Czech Republic, were mostly flat against the euro.

The MSCI’s emerging market equity index added 0.6%, Turkish stocks rising
0.7% and Russian stocks gaining 0.8%.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Copper dips as Chile mine workers decide against strike

(Reuters) - Copper prices slipped on Tuesday after workers at a mine in
Chile signed a new labour contract, lifting concerns about a strike, while
economic worries were renewed after an uptick in coronavirus cases.

Benchmark copper on the London Metal Exchange (LME) was down 0.2% at $6,408
a tonne at 1107 GMT, though still close to a two-year high of $6,633 reached
on July 13.

WisdomTree analyst Nitesh Shah said prices, which are higher than before the
coronavirus outbreak, should continue to rise as demand recovers and virus
safety measures restrict production.

But he said a spike in COVID cases in many parts of the world was raising
questions about whether demand growth will “be as vigorous as expected.”

CHILE: Supervisors at Antofagasta’s Centinela copper mine in Chile agreed to
a new contract offer, the union president said.

VIRUS: Nations in Asia introduced new restrictions and a Britain imposed a
quarantine on travellers from Spain, as the world confronted the prospect of
a second wave of coronavirus infections.

DOLLAR: The U.S. dollar steadied around two-year lows, helping metals by
making them cheaper for holders of other currencies.

FACTORIES: Export expectations in Germany rose in July, new orders rose last
month for key U.S.-made capital goods and profits at China’s industrial
firms increased in June.

UNITED STATES: Senate Republicans on Monday proposed a $1 trillion
coronavirus aid package.

VACCINE: Moderna and Pfizer launched two 30,000-subject trials of COVID-19
vaccines that could clear the way for regulatory approval and widespread use
by the end of this year, the companies said.

STOCKS/SPREAD: On-warrant copper stocks in LME-registered warehouses fell to
44,850 tonnes from around 250,000 tonnes two months ago. A premium for LME
cash copper over three-month metal also points to tight nearby supply.
MCUSTX-TOTAL MCU0-3

OTHER METALS: LME aluminium was up 0.2% at $1,710.50 a tonne, zinc fell 0.9%
to $2,217.50, nickel slipped 1.3% to $13,540, lead was up 0.2% at $1,854 and
tin was 0.6% lower at $17,920.

Gold topples off record high, dollar gets respite

(Reuters) - Gold hit a record high on Tuesday before the sheer scale of its
gains drew a burst of profit-taking, which in turn helped the dollar up from
two-year lows and kept equity markets subdued.

The precious metal had risen by almost $40 at one point to reach $1,980 an
ounce only for a wave of selling to suck it back down as far as $1,915.

Gold is still up over $125 in little more than a week as investors bet the
Federal Reserve will reaffirm its super- accommodative policies at its
meeting this week, and perhaps signal a tolerance for higher inflation in
the long run.

One shift could be to average inflation targeting, which would see the Fed
aim to push inflation above its 2% target to make up for years of
under-shooting.

The retreat in gold took some steam out of stocks. Europe’s STOXX 600 and
Wall Street future’s both gave up modest gains to stand 0.25% to 0.5% lower
after Asia-Pacific had eked out gains thanks to China, Hong Kong and Korea.
.

Japan’s Nikkei finished down again, though, and E-Mini futures for the S&P
500 were back in the red after a 1.7% rebound from the Nasdaq had helped
markets back up on Monday.

That rise was again led by technology stocks as investors wagered on upbeat
earnings reports due this week. Analysts also noted the falling dollar
helped, since more than 40% of S&P 500 earnings come from abroad.

The rest of the week will see 179 S&P 500 companies reporting second-quarter
earnings, including Google, Amazon and Apple. Drug company Pfizer and
fast-food chain McDonald’s are among the big names reporting on Tuesday.

Shoqat Bunglawala, head of European and Asian portfolio solutions at Goldman
Sachs Asset Management, said his firm was now “neutral” on a cross-asset
basis but there had been some positives from earnings.

DOLLAR IN DECLINE

There were also hopes a stimulus extension could be agreed in the United
States. U.S. Senate Republicans were trying to complete details of a $1
trillion to $1.5 trillion coronavirus aid proposal before enhanced
unemployment benefits expire on Friday.

The proposal could cut unemployment benefits to $200 from $600, which would
be a blow to household incomes and spending power.

Some 30 million Americans are out of work and states are tightening lockdown
restrictions again, a trend that has also dragged on the U.S. dollar.

Alan Ruskin, head of G10 strategy at Deutsche Bank, noted currencies had
been tracking the relative performance of their economies, so that
high-ranked economic performance was associated with stronger currencies.

The dollar has been falling almost across the board for month. It reached a
two-year low against a basket of currencies at 93.416 overnight before
recovering to 93.975.

The euro dropped back to $1.1715 after rising to its highest in two years at
$1.1781. The dollar had touched its lowest against the Swiss franc since
mid-2015. It also fell to a four-month low of 105.10 against the Japanese
yen before squatting at 105.25.

The reversal in the dollar combined with the uncertainty over COVID-19 and
the prevalence of negative real bond yields has propelled gains by precious
metals, and not just gold.

Silver rose as high as $26.16 at one point, the highest since April 2013 and
a gain of 33% in seven sessions, before sliding back 4% in London to stand
at $23.5 an ounce.

Oil prices also tend to benefit from a falling dollar but have been hampered
by worries about demand as countries impose more travel restrictions.

Brent crude futures edged up 4 cents to $43.45 a barrel. U.S. crude eased 9
cents to $41.51.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

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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