Bulls n Bears Daily Market Commentary : 27 March 2020

Mon Mar 30 00:01:29 CAT 2020

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Bulls n Bears Daily Market Commentary : 27 March 2020

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Zimbabwe Stock Exchange Update

Market Turnover ZWL$30,883,077.75 with foreign buys at ZWL$342,446.00 and foreign sales were ZWL$1,948,300.00 Total trades were 196

The All Share index ended the week on a lower note after losing 9.06 points to close at 457.88 points. BAT further retreated by $1.3967 to $86.000, OLD MUTUAL LIMITED   shed another $1.2240 to $36.5113 and SEEDCO INTERNATIONAL LIMITED was $0.4600 weaker at $4.5500. PPC LIMITED eased another $0.4350 to $3.8650 and HIPPO traded $0.3000 lower at $6.5000.

Losses were offset by gains in MEIKLES LIMITED  which gained $0.0365 to $7.5000. ECONET WIRELLESS  rose by $0.0108 to $2.5042 and FBC LIMITED was up by $0.0100 to end at $1.2225. ZPI LIMITED  was $0.0064 stronger at $0.2199.

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  Global Currencies & Equity Markets

South Africa

South Africa sees IMF loan to fight coronavirus as last resort

(Reuters) - South Africa would only consider approaching international agencies such as the International Monetary Fund (IMF) for emergency funding as a last resort to help in the country’s fight against the coronavirus, the finance minister said on Sunday.

South Africa entered a 21-day lockdown on Friday with people restricted to their homes and most businesses shuttered. The country has reported more than 1,180 cases of coronavirus, but no deaths, and now faces a near certain deep recession.

Approaching multilateral institutions for cash, especially the IMF, has long been unpopular with the government, with such a move strongly opposed by the radical faction of the ruling party as well as its large trade union allies.

The government, including Mboweni, has also expressed reservations about approaching the IMF for fiscal support, pointing to stringent spending controls the fund would be likely to impose on the country.

That would threaten South Africa’s welfare system which is among the world’s largest and a key factor behind the African National Congress’s electoral dominance.

On Friday, Moody’s cut South Africa’s debt rating to below investment grade, meaning all three of the big credit ratings agencies rank the country at junk. This is likely to trigger capital outflows of as much as $12 billion.

Central bank governor Lesetja Kganyago, speaking on the same teleconference, said there would be no need to impose capital controls to limit an anticipated heavy selloff of the rand and local bonds following the downgrade.

A government official said the Treasury had spoken with ratings agency Fitch in the past week. Fitch and S&P Global Ratings, which already rank South Africa at junk, are due to deliver credit reviews in the next few months.

The official said Fitch expressed concerns about rising debt, above 60% of GDP, as well as limited funds the government had to respond to the virus, asking whether the Treasury would be approaching the IMF for bridge finance. 

Zambia

Kwacha will remain worthless for a long time

Financial analysts mambo Hamaundu says it will be very difficult for the kwacha to rebound against major convertible currencies because it is affected by many factors.

Mr Hamaundu tells phoenix news that the local currency has been negatively hampered by the outbreak of the covid 19, debt servicing and generally low liquidity levels in the economy due to subdued economic activities.

And Mr Hamaundu says there is seemingly nothing much that can be done in the short to medium term to have the kwacha strengthened and stable.

The kwacha is trading at 17. 56 Ngwee against one United States dollar.

Meanwhile, Mr. Hamaundu has attributed the continued failure by government to pay salaries to various local authorities and provide funding for state projects among other challenges to failure by the regime to marry pronouncements with consistent action.

This follows none payment of salaries of council, university and college lecturers among others and failure to pay retirees.

Mr. Hamaundu explains that technocrats already foresaw Zambia’s current challenges which caused the fiscal deficit to widen as the country’s leadership continued to show appetite for expenses.

PHOENIX NEWS

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Global Market 

Complacency to chaos: how Covid-19 sent the world’s markets into freefall

For the global financial system, it has been a month of unprecedented pandemonium as the coronavirus pandemic breaks all records, bringing western capitalism to its knees as the disease spreads.

Major landmarks in global markets that typically take years to reach have fallen like dominos in a matter of hours and days. More than eight years of gains on the FTSE 100 have been wiped out in barely a month, with the index plummeting to its lowest level since 2011.

Global stocks have had the best and worst sessions in a decade on consecutive days, pinging around amid widespread investor panic. The pound has slid to a 35-year low and fortunes have been lost, rewriting the financial landscape.

Against a backdrop of urgent attempts by governments and central banks to limit the damage as nations stamp down on economic activity to stop the virus spreading, investor panic sent Wall Street into its fastest bear-market plunge in history. The Dow Jones industrial average of 30 leading US company shares fell by more than 20% from its previous peak – the definition of a bear market – in little more than 20 days, outstripping the speed of the slide during the 1929 Wall Street crash.

Ending the longest bull market in US stocks in history, Wall Street has had two of the five worst days ever – only days apart from the fourth-best day on record. On the worst day of all, 16 March, the Dow crashed by almost 3,000 points, wiping 12.9% off the index.

The extent of the frenetic trading has meant that circuit breakers – which temporarily halt the market to prevent stocks falling through the floor – have been triggered four times in the past month, making a total of five times since the system was launched in the late 1980s. The only other time was during the 2008 financial crisis.

The crash in the past month comes despite global central banks racing into action with emergency interest rate cuts, attempting to calm panicked markets and support jobs and growth. The US Federal Reserve has cut rates near to zero and promised to buy government bonds in unlimited amounts, while the Bank of England will pump £200bn into the economy through quantitative easing, and governments around the world will guarantee loans and pay workers’ wages, promising to do whatever it takes” to combat the economic disaster.

As the damage continues to unfold, analysts believe the deepest global recession in history has arrived, surpassing the magnitude of two world wars. Questions remain over whether the downturn will be as long-lasting as previous episodes, with hopes for a quick snap-back in activity to also make it the shortest in history.

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But observers say the world will never look the same again when the storm clouds clear.

“This is a generation-defining moment,” said Mohamed El-Erian, chief economic adviser at the insurance giant Allianz. “I’ve never seen an economic stop on this scale, certainly never in big countries and all at once.”

Although China was grappling with the disease around the turn of the year, stocks took until late January to wobble. Before the lunar new year – key for shopping and tourism in the world’s second-largest economy – authorities locked down the central city of Wuhan, where the virus originated, triggering mass disruption to global supply chains as China’s equivalent of Detroit downed tools.

The Asian economic superpower may now suffer its first quarterly fall in GDP since 1976, the year Mao Zedong died.

At first investors remained complacent, betting that Covid-19 would be no worse for world growth than Sars in 2003, when that coronavirus outbreak – related to Covid-19 – was mainly limited to Asia, and China quickly recovered. Yet those who “bought the dip” after the initial tumble – now minuscule in hindsight – are left nursing massive losses.

El-Erian, a former deputy director of the International Monetary Fund, said: “We went from a period of total complacency that not only brushed aside increasing evidence of a cascading economic stop, but also over-relied on central banks’ ability to shield markets. Then, phase two was one of near panic, where markets woke up to the ugly reality.”

Yet movements on financial markets have real-world consequences. Tumbling asset prices hit the pensions of millions and make it harder for firms to access finance. Surging bond yields make it costlier to fund spending plans, particularly in poorer nations, where the threat of a new debt crisis alongside the health emergency could spell disaster.

Investors worry that a negative feedback loop could form: fears of recession causing markets to tumble, leading to tougher borrowing conditions, fuelling recession as companies struggle for finance. The unprecedented central bank intervention is designed to prevent a repeat of the 2008 financial shock, and the downturn that followed.

The lack of a united response from world leaders has fuelled the global sell-off. Unlike in 2008, when a coordinated G20 response was used to fight the financial crisis, world leaders are in disarray. Donald Trump first called the virus a Democratic hoax, while promising that efforts to contain the disease can be lifted next month, even as the virus spreads.

The prospect of a global downturn has driven oil prices down dramatically this month, to 17-year lows. Global demand has slumped because of lockdowns, while the infighting between G20 nations has made matters worse as Saudi Arabia boosts production in a price war with Russia. Some US shale producers face going bust – dashing America’s hopes of energy independence, and risking a wave of corporate bond defaults this year.

Covid-19 even threatened to reignite the eurozone debt crisis. European governments have promised massive stimulus packages, and the resulting borrowing will drive deficit levels high.

Italian bond yields – the interest rate on Rome’s debt – spiked after the European Central Bank chief Christine Lagarde sparked fears that it might not step in if investors lost faith in Italy’s ability to manage its debt mountain. Cue a rapid clarification from the ECB, but some anxiety remains.

In a historic, if temporary, move, the EU has now suspended its borrowing rules, allowing member states to spend what’s needed – and worry about the bill later. Even Germany, the uber-fan of balanced budgets, has ripped up its “debt brake” and devised a historic €156bn (£140bn) emergency budget. The days of eurozone austerity may be over, at least for now, as Europe heads for a deep recession.

Although stocks recovered during the week, the mood soured on Friday, with heavy losses again in Europe and on Wall Street. City investors muttered darkly about “bear market rallies”, remembering that stocks can occasionally rally even during a lengthy sell-off.

With the VIX volatility index – known as Wall Street’s fear gauge – hitting its highest levels ever this month, further wild swings seem certain, especially as America has now overtaken China for Covid-19 infections.

Yet El-Erian has noted that, after phases of complacency and panic, a period of relief has spread as governments and central banks use unprecedented stimulus packages to cushion the blow. The next phase will test how effective the response is, as the world economy attempts to find its feet once more.. – theguardian.com 

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Commodities Markets

London copper edges up on stimulus hopes, but demand fears cap gains

(Reuters) - London copper prices rose slightly on Friday as investors eyed further stimulus by major countries to cushion the worldwide economic meltdown triggered by the coronavirus pandemic.

However, gains were limited as widespread lockdowns to curb the outbreak threatened the demand outlook for the metal used in construction, power and manufacturing.

Three-month copper on the London Metal Exchange (LME) edged up 0.1% to $4,808.50 a tonne by 0215 GMT.

Leaders of the group of 20 major economies on Thursday said they would “do whatever it takes to overcome the pandemic,” pledging to inject over $5 trillion into the global economy to limit job and income losses.

European Union lawmakers also approved emergency funds to stem the bloc’s economic slump.

Profits earned by industrial firms in China, the world’s biggest consumer of copper, slid 38.3% year-on-year to 410.7 billion yuan ($58.09 billion) in the first two months, official data showed.

FUNDAMENTALS

* OTHER PRICES: LME aluminium rose 0.8% to $1,548 a tonne, lead advanced 1% to $1,702 a tonne. The most-traded copper contract on the Shanghai Futures Exchange (ShFE) fell 0.4% to 38,920 yuan a tonne, tracking losses in London overnight, while ShFE lead was up 1.5% to 13,785 yuan a tonne.

* COPPER: South Africa’s main export terminals will close to mineral exports from midnight, when a nationwide 21-day lockdown begins, disrupting copper and cobalt supplies from the Democratic Republic of Congo and Zambia.

* GLENCORE: Glencore PLC halted a number of smaller mines due to government restrictions to curb the spread of the coronavirus but added its larger operations were not materially impacted.

* For the top stories in metals and other news, click or

MARKETS NEWS

* Asian stocks rose as investors wagered policymakers will roll out additional stimulus measures to combat the coronavirus pandemic after U.S. unemployment filings surged to a record.

Chalco 2019 aluminium output falls 9% after smelter shutdowns

(Reuters) - Chalco, China’s biggest state-run aluminium producer, churned out 9% less metal in 2019 as it shut two uncompetitive smelters and barely eked out a profit in the fourth quarter, while it played down the impact of the coronavirus on the industry.

Chalco, or Aluminum Corp of China Ltd , produced 3.79 million tonnes, according to its presentation to analysts reviewed by Reuters - just managing to retain its spot as the world’s No.2 listed aluminium producer ahead of rival Rusal’s 3.76 million tonnes.

Top producer China Hongqiao last week reported an 11.3% drop in annual output to 5.64 million tonnes.

The lower production numbers come as Chinese aluminium firms brace for a difficult 2020 with prices crashing to more than four-year lows of 11,340 yuan ($1,602) a tonne this week amid ample supply, coronavirus-hit demand and a broad selloff by commodities investors.

Analysts say prices are below most smelters’ break-even and have prompted some to shut units for maintenance.

Chalco, which said in a filing on Thursday that it shuttered two “non-competitive” smelting subsidiaries in 2019, made no mention of taking similar measures due to the virus crisis.

The coronavirus, which originated in China late last year, has infected more than 81,000 people in the mainland and killed over 3,000. Globally, the number of cases has crossed the half million mark, while more than 24,000 have died.

The epidemic has ground daily life and businesses to a halt with governments worldwide locking down borders and slapping strict travel curbs to contain the spread.

VIRUS IMPACT NOT SUBSTANTIAL

The overall pattern of the aluminium industry has, however, not changed substantially due to the epidemic, although some orders from downstream processors and construction of new projects have been affected, Chalco said.

The aluminium producer also noted that primary aluminium capacity in industrial heartland Henan and “other regions with high costs may exit” the market, as places like Yunnan and Sichuan become more preferable locations.

Chalco’s external aluminium sales fell 11.9% last year, while output of raw material alumina rose 2.1% to 13.8 million tonnes, according to the presentation.

The new 2 million tonnes per year alumina refinery in Guangxi is “advancing as scheduled” and is expected to be completed in June, Chalco adds in the presentation.

The company did not immediately confirm the contents of the presentation.

Chalco was less profitable than Rusal and Hongqiao in 2019.

The latter two saw annual profits of $960 million and about $863 million, respectively, while Chalco’s net income rose 2.4% to 851 million yuan ($121 million) on higher trading volumes while it barely scraped a profit in the final quarter.

Excluding a loss in the year-earlier period, the fourth-quarter net income of 42.6 million yuan was Chalco’s lowest since the first quarter of 2016, Refinitiv Eikon data shows. ($1 = 7.0633 Chinese yuan)

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

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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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