Bulls n Bears Daily Market Commentary : 29 July 2020

Thu Jul 30 04:50:50 CAT 2020

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Bulls n Bears Daily Market Commentary : 29 July 2020

<https://www.renaultzimbabwe.com/cars/duster/overview.html?utm_source=newsle
tter&utm_medium=email&utm_term=&utm_content=pip&utm_campaign=newsletter-fait
hcapitalcorp-jul20> ZSE commentary

Zimbabwe to resume stock trading, Old Mutual unit remains suspended

(Reuters) - Zimbabwe’s stock market will resume trading next week after a
state financial intelligence body concluded an investigation, but three
stocks also listed on other exchanges, including Old Mutual, will remain
suspended, the finance minister said on Tuesday.

Mthuli Ncube Ncube said investigations revealed that investors used the Old
Mutual Ltd share price as a proxy exchange rate implied by its prices on
foreign bourses such as the London Stock Exchange.

This had caused the slide in the value of the Zimbabwe dollar, Ncube said.

The government halted trading on the bourse last month, saying it was being
used by speculators to undermine the currency.

Old Mutual said in a statement that it was in talks with Zimbabwean
authorities so that the insurer’s listing would not continue to create the
concerns raised by the government.

The suspension of the stock exchange and some mobile phone-based payments
was intended to arrest the currency slide at a time of severe economic
crisis but has spooked some investors already skittish about Zimbabwe.

Ncube said an investigation by the Financial Intelligence Unit revealed a
link between the movement in prices of three dual-listed stocks and the
parallel market rate of the Zimbabwe dollar.

But there was no evidence that Old Mutual, Pretoria Portland Cement and
SeedCo International, were involved, Ncube said.

Morgan Nzwere, group CEO of SeedCo, said the company had not committed any
offence and would wait for regulators to conclude investigations. PPC did
not immediately respond to requests for comment.

Trading on the Zimbabwe Stock Exchange would resume on Aug. 3 but the three
stocks would remain suspended “while further consultations continue on the
best way forward regarding their re-listing under suitable rules,” Ncube
said.

Stock market traders say the government is pushing to de-list the three
firms and list them on a yet to be established dollar-denominated exchange
in the resort town of Victoria Falls.

President Emmerson Mnangagwa’s ruling ZANU-PF party has recommended the
de-listing of Old Mutual. 

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.

South Africa

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> 

GLOBAL MARKETS

Equities edge higher, safe havens flat ahead of Fed meeting

(Reuters) - Stock markets edged higher and perceived safe-haven assets were
steady on Wednesday as investors awaited news from the U.S. Federal
Reserve’s latest policy meeting.

The Fed is expected to sound reassuringly accommodative at its policy review
later in the day and perhaps open the door to a higher tolerance for
inflation - something dollar bears think could squash real yields and sink
the currency even further.

Investors are also focused on U.S. Congress and White House as they clash
over new measures to replace enhanced coronavirus unemployment benefits that
are due to expire on Friday.

The market consensus is that a $1 trillion support package will be agreed,
said David Riley, chief investment strategist at BlueBay Asset Management.

MSCI’s gauge of stocks across the globe gained 0.29% following modest losses
in Europe and Asia.

In morning trading on Wall Street, the Dow Jones Industrial Average rose
17.42 points, or 0.07%, to 26,396.7, the S&P 500 gained 13.78 points, or
0.43%, to 3,232.22 and the Nasdaq Composite added 74.97 points, or 0.72%, to
10,477.07.

Deaths from the novel coronavirus in the United States registered their
biggest one-day increase since May on Tuesday, with this month’s spike in
infections having forced some states to make a U-turn on reopening their
economies.

Asia and Europe have also been hit by new surges in COVID-19 infections,
with several countries imposing new restrictions and Britain imposing 14-day
quarantines on travelers from Spain.

Traditional safe havens were mixed. Gold paused its rally, down 0.2% at
$1,954.33 an ounce.

The dollar index fell 0.227%, with the euro up 0.28% to $1.1747. Benchmark
U.S. Treasury 10-year notes last rose 1/32 in price to yield 0.5773%, from
0.581% late on Tuesday.

Oil prices climbed after a surprise drop in U.S. crude inventories was
enough to offset concerns about U.S. fuel demand, though concerns about the
record increases in COVID-19 infections kept gains in check.

U.S. crude recently rose 0.63% to $41.30 per barrel and Brent was at $43.72,
up 1.16% on the day.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Australia's Fortescue posts record iron ore shipments, beats full-year
forecast

(Reuters) - Miner Fortescue Metals Group on Thursday beat its full-year iron
ore estimates with record shipments in the fourth quarter on the back of
strong demand for the steel-making ingredient from China.

Resurgent demand for iron ore from the world’s biggest importer of the raw
material has buoyed prices that have far outperformed other commodities,
even as much of the rest of the world is still gripped by the coronavirus
pandemic.

Fortescue, the world’s fourth-largest iron ore miner, shipped 47.3 million
tonnes (Mt) of the steel-making material in the quarter ended June, up from
the 46.6 million tonnes a year ago and ahead of an average estimate of 46.1
Mt from three brokerages.

The company reported shipments of 178.2 Mt for the year, above the miner’s
own upgraded forecast of 175-177 Mt, and forecast shipments of 175-180 Mt
for the year ahead, boosted by expectations that Beijing will continue with
stimulus efforts to stoke the world’s second-biggest economy.

Shares rose as much as 3.5% to a record high before trading at A$17.25, up
2.4%, by 0038 GMT.

Fortescue received $80.64 dry metric tonne (dmt) over the quarter, or about
86% of the average Platts 62% CFR Index price, slightly short of a UBS
estimate for 90% or of $84.20 per dmt.

On Wednesday, Rio Tinto said it saw a sharp V-shaped recovery in China as
stimulus spurred industrial activity, helping its first-half profit beat
market expectations. Both Rio and BHP reported higher iron ore output thanks
to strong conditions in China.

Fortescue’s costs did rise, though, to $13.02 per wet metric tonne in the
quarter, nearly 2% higher than a year ago due to COVID-19.

It also slightly raised its cost projections for its Eliwana Mine and Rail
project to $1.325 billion to $1.375 billion from $1.275 billion due partly
to costs associated with COVID-19 impacts. First ore is expected on train in
December.

Miner Agnico's quarterly profit boosted by gold price surge

(Reuters) - Canadian gold miner Agnico Eagle Mines reported a near four-fold
rise in quarterly profit, driven by a surge in gold prices, while its costs
tied to exploration also fell.

Net income rose to $105.3 million, or 43 cents per share, in the second
quarter ended June 30 from $27.8 million, or 12 cents per share, a year
earlier.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

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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