Bulls n Bears Daily Market Commentary : 03 November 2020

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Bulls n Bears Daily Market Commentary : 03 November 2020

 


 

 


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ZSE commentary

 

ZSE rebounds… 

The market rebounded in Tuesday’s session spurred by gains in selected heavies. The primary All Share Index gained 1.95% to 1,505.15pts while, the Industrial Index rose 2.13% to 4,954.53pts. The blue chips Index added 3.92% to close higher at 974.39pts. Top capitalised stock CBZ led the market resurge on a 10.64% jump to $44.4510, trailed by conglomerate Innscor that firmed 10.03% to close at a vwap of $20.9138. Art added 3.10% to $2.3000 while, apparel retailer Truworths ticked up 3.03% $0.1700. Wrapping the gainers’ pack was fintech group Cassava which extended 1.10% to $3.8988. Headlining the fallers’ pack was Dairibord which succumbed 7.41% to end pegged at $8.3333 while, Hippo followed letting go 6.48% to $14.0278. Banking group NMB shed 5.19% to $2.8444, as clothing retailer Edgars retreated 4.26% to $0.9000.

 

Bindura’s 3.80% decline to $3.8000 dragged the Mining Index to 3,667.99pts after trimming 3.13%. Thirty counters registered price movements distributed into twelve risers and eighteen fallers leaving the market with a negative breadth of six. Circa 6.98m shares exchanged hands on the bourse yielding a value outturn of $52.12m. Top volume drivers of the day were Econet (21.50%), Axia (17.28%), OKZIM (14.41%) and Simbisa (10.46%). Values of the day were driven by CBZ, Innscor and Econet which claimed a combined 42.14% of the aggregate. Foreign inflows amounted to $8.56m while, outflows stood at $4.47m to establish a net funds inflow position of $4.09m.

 

 

 

Global Currencies & Equity Markets

 

South Africa

 

Rand remains under pressure ahead of US election

JOHANNESBURG – The South African currency remained under pressure as market jitters surrounding United States elections and surging infections across the globe fed into risk-off sentiment according to NKC Research.

 

We expect the FOMC will maintain its extremely accommodative monetary policy stance at its policy meeting this week, holding off any new initiatives.

 

 

The overlap between the meeting and the US election and the deteriorating health situation will favour a wait-and-see approach given the uncertain fiscal policy outlook.

 

Meanwhile, the Fed’s emergency lending facilities have only been tapped to modest degree, however, policymakers view the facilities’ availability as a backstop that is key to help sustain market functioning and keep financial conditions accommodative.

 

Therefore, with most of the emergency lending facilities slated to expire at the end of this year we look for the FOMC to extend the operational deadline for these programmes into 2021.

 

At the close of local trade, the rand quoted little changed at R16.26/$, after trading in range of R16.20/$ - R16.33/$.

 

Absa PMI starts Q4 on a strong footing

 

The Absa purchasing managers’ index (PMI) rose from a revised 58.5 points in September to 60.9 points in October, starting 2020 Q4 on a very strong footing.

 

While easing somewhat last month, both the business activity (at 62.8 in October) and new sales orders (67.0) sub-indices remain at robust levels, while the inventories index was another important contributor to the October reading: the latter sub-index rose from 51.0 in September to 61.1 in October – the highest reading in over 13 years.

 

The employment index recorded a fifth-consecutive improvement but, at 49.1, remains just below the 50-point threshold. This suggests that employment levels are stabilising.

 

However, the sub-index has been in contractionary territory since mid-2016 and the October figure suggests job losses persist, albeit at a much lower rate. Following strong readings north of 60 points in the preceding two months, the index tracking expected business conditions in six months’ time dropped to 56.7 points in October.-iol

 

 

 

Nigeria

 

Naira is weakened at black market, dollar supply drop by 51.5%

Forex turnover dropped by 51.5% as Nigeria’s exchange rate at the NAFEX window appreciated against the dollar to close at N385.63/$1 during intra-day trading on Monday, November 2.

 

Also, the naira depreciated against the dollar, closing at N463/$1 at the parallel market on Monday, November 2, 2020, as businesses open up after relaxation of the curfew initially imposed to curtail the widespread violence that followed the hijacked #EndSARS protests.

 

This is also as businesses that were shut down due to the outbreak of violence in Lagos and some parts of the country during the protests against the special anti-robbery unit (SARS) and police brutality by the Nigerian youths get back to full activity.

 

Parallel market: According to information from Abokifx – a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N463/$1 on Monday. This represents a N1 drop when compared to the N462/$1 that it exchanged for on Friday, October 30.

 

·         The local currency had strengthened by about 7.8% within the one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.

·         The CBN has sold over $500 million to BDCs since they resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.

·         However, the exchange rate against the dollar has remained volatile after the initial gains made, following the CBN’s resumption of sales of dollars to the BDCs.

·         The President of the Association of Bureau De Change Operators, Aminu Gwadebe, said he expects the impact of the extra liquidity in the market to be gradual.

·         Despite the drop in speculative buying of foreign exchange, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.

 

 

NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N385.63/$1.

 

This represents a 37 kobo gain when compared to the N386/$1 that it exchanged for on Friday, October 30.

·         The opening indicative rate was N386.25 to a dollar on Monday. This represents a 38 kobo gain when compared to the N386.63 that was recorded on Friday.

·         The N393.49 to a dollar is the highest rate during intraday trading before it closed at N385.63 to a dollar. It also sold for as low as N383/$1 during intraday trading.

·         Forex turnover: Forex turnover at the Investor and Exporters (I&E) window declined by 51.5% on Monday, November 2, 2020.

·         According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $214.78 million on Friday, October 30, 2020, to $104.20 million on Monday, November 2, 2020.

·         The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate their funds.

·         The drop in dollar supply after the previous trading day’s huge increase reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.

·         As part of the measure to check forex abuse and check illegal transactions, the CBN last month directed the freezing of accounts of about 38 companies.

·         The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.

·         Total forex trading at the NAFEX window in the month of September was about $1.98 billion, compared to $843.97 million in August.

·         The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.

 

 <mailto:info at bulls.co.zw> 

 

Global Markets

 

US Dollar Dips As Foreign Exchange Markets Price In A Trump Defeat

Although there is a high degree of uncertainty, markets have moved towards anticipating a Biden Presidential election victory. There were, however, also expectations that Trump would lose in 2016 with carnage as he defied expectations.

 

In 2016, the dollar declined sharply, but an unexpected Trump victory this time could spark initial US currency gains amid a slide in risk appetite. Volatility will be very high over the next 24 hours at least.

 

There have been significant market moves in Europe on Tuesday with equity markets making strong gains. There has also been a move into pro-risk currencies such as the Canadian dollar while the dollar has declined amid a dip in defensive demand with the euro-to-dollar rate testing 1.1700. There will be scope for net dollar losses against European and commodity currencies if a Biden victory is confirmed.

 

Sterling has also benefitted with the Pound-to-Dollar exchange rate (GBP/USD) strengthening to near 1.3000. GBP/USD is likely to make initial gains if there is a clear Biden win overnight. Any other outcome would tend to support the dollar and limit GBP/USD support.

 

When will a result be known?

The first polls close at 23.00 GMT with the safe Republican states of Indiana and Kentucky.

 

Voting in the swing states of Georgia and North Carolina will end at 00.00GMT and 00.30GMT respectively. First results from the crucial state of Florida are likely to be declared around 01.30 GMT.

 

If there is going to be a decisive victory for either side, it should be clear at this stage.

 

Should Biden manage to secure one of those three states (especially Florida or North Carolina) then the chances for Donald Trump would fall dramatically.

 

If, the Presidential election is close, a clear outcome will not be known for hours and there will be the risk that a result is not declared for days, especially given uncertainties over the counting of postal votes.

 

As a marker, Trump’s 2016 victory was inevitable at 06.35GMT when he won Pennsylvania.

 

Biden victory seen as a boost for risk appetite…

There is a consensus that a Biden victory would weaken the dollar, although the impact could be short lived with global risk trends also important.

 

 

An extremely important aspect will be securing a decisive result as quickly as possible. Immediate attention will tend to focus on the Presidential battle, but the Senate outcome will also be important, especially from a slightly longer-term perspective.

 

ANZ also comments that unease will increase sharply if there is no early concession with uncertainty likely to triumph over risk appetite.

 

Any widespread reports of voter intimidation would undermine confidence. Aggressive legal action to block or over-turn results would also damage equities.

 

 

If equities slide, there will be scope for renewed defensive dollar demand, although there is no clear consensus.

 

If Biden wins, but the Democrats fail to win the Senate, there will be fears over policy deadlock.

 

According to TD Securities, equities could be resilient if there is a clear Trump victory, but an unclear outcome could trigger an S&P 500 slide of as much as 5%.

 

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

 

Commodities Markets

 

 

Oil rises ahead of US elections and as Europe locks down

Lockdowns in Europe and uncertainty over a US election could mean oil market volatility may be on the horizon.

 

Oil prices gained nearly 3 percent on Monday, paring earlier losses, on the eve of what is almost certain to be a contentious presidential election in the United States and as major economies in Europe go back into lockdown in an effort to stem rising coronavirus infections.

 

Global benchmark Brent crude for January delivery rose $1.03 or 2.7 percent to settle at $38.97 a barrel on Monday, while US benchmark West Texas Intermediate (WTI) crude for December delivery rose $1.02 or nearly 3 percent to settle at $36.81 a barrel.

 

Both contracts fell earlier in the session after a sharp selloff last week when Brent fell 12 percent to below $38 a barrel – exiting its five-month trading range.

 

But reports that Russia is considering delaying its planned loosening of the taps in January helped lift prices later in the session on Monday.

 

The Organization of Petroleum Exporting Countries and its allies including Russia, a grouping known as OPEC+, have cut output by about 7.7 million bpd to prop up sliding oil prices.

 

Goldman analysts forecast a delay in plans to ramp up output in January. The next OPEC+ meeting kicks off on November 30.

 

 

Oil markets have been under pressure in recent days as business and travel-sapping lockdowns return to Germany, France, Italy and the United Kingdom. Also adding pressure on prices, Libya substantially upped its oil production in recent days.

 

A Rystad Energy analysis expects Libya’s crude oil output to average approximately 750,000 bpd in November and climb to 1 million bpd in February 2021

 

Healthy readings on global factory activity also helped buoy oil prices on Monday.

 

Japan’s export orders saw a boost and China’s factory activity rose to its highest level in nearly 10 years in October. In the US, the ISM manufacturing index also increased more than expected in October with spikes in production, new orders, and employment components.

 

US elections

Oil markets are also awaiting the outcome of the US presidential election.

 

 

Another possible demand hit from surging COVID-19 infections paired with uncertainty around OPEC+’s pathway to 2021 and the US elections means could spell volatility ahead.

 

A possible victory by Trump’s challenger, Democratic presidential nominee Joe Biden, could also lead to more oil flowing into a market where demand has been crushed by the pandemic.

 

Biden has indicated he wants to return to the Iran nuclear deal, a move that would give Iran the green light to export more oil.

 

 

Dickson also points to a possible smoothing of relations with Venezuela.

 

But Dickson sees forces at play that could also boost demand, should Biden win the White House, including better trade relations with China and emerging markets, loosening of trade policies in general, an uptick in the exchange of goods and a spike in demand for maritime bunker fuel.

 

Biden, who has pledged to promote a clean energy economy by investing $1.7 trillion over 10 years, is also likely to deliver a bigger fiscal stimulus package. The expected $2 trillion would inject life into the stagnating economy, boosting domestic oil demand by 300,000 bpd, according to Rystad Energy-AL JAZEERA

 

 

 

Gold Prices Drop As Investors Await US Election Results

Gold prices edged down on Tuesday (November 3), as cautious investors awaited the outcome of the US presidential election with President Donald Trump closely trailing Democrat Joe Biden in national opinion polls. Spot gold was down 0.1 per cent at $1,892.52 per ounce by 0353 GMT (9:23 am in India). US gold futures were little changed at $1,892.00 per ounce.

 

As long as there isn't a Democrat sweep, there will be questions on fiscal stimulus, while an uncertain or contested result will likely favor the dollar and weaken gold, he added. Election polls show Mr Biden with an outright majority nationally but the race between both him and Republican candidate Mr Trump remains closer in several battleground states.

 

Analysts say a Biden win could help the bullion rally with his plans to inject a potentially large stimulus aid. The fact that there isn't a new fiscal stimulus is holding gold back and it may not happen if Mr Trump gets re-elected because it will take time to negotiate with the Democrats and it will just be drawn out, said ED&F Man Capital Markets analyst Edward Meir.

 

 

Gold, which is seen as a hedge against inflation and currency debasement, has gained over 24 per cent so far this year on unprecedented stimulus measures.

 

Meanwhile, two major state-owned Chinese banks warned on Monday that they could restrict the trading of precious metals and foreign exchange products if the US election fuels market volatility.

 

Also on investor's minds, the Federal Open Market Committee (FOMC) will begin its two-day meeting on Wednesday, with policymakers expected to keep interest rates unchanged. Silver was little changed at $24.03 per ounce. Platinum fell 0.2 per cent, to $856.71 and palladium gained 0.9 per cent to $2,231.90.-ndtv

 

 

 

 

 


 

INVESTORS DIARY 2020

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


Bindura

AGM

Virtual

05/11/2020 | 14:00

 


Natfoods

AGM

Royal Harare Golf Club

09/11/2020 | 8:45am

 


Afdis

AGM

virtual

13/11/2020 | 12:20pm

 


Zimbabwe

National Unity Day

Zimbabwe

22/12/2020

 


 

Christmas Day

 

25/12/2020

 


 

Boxing Day

 

26/12/2020

 


 

New Year’s Day

 

01/01/2021

 


 

 

 

 

 


 

 

 

 


 

 

 

 


Invest Wisely!

Bulls n Bears 

 

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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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