Bulls n Bears Daily Market Commentary : 06 November 2020

Fri Nov 6 17:11:38 CAT 2020

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Bulls n Bears Daily Market Commentary : 06 November 2020

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ZSE commentary

ZSE closes week in the black…

The ZSE remained in the black in week ending session as three of the benchmarks in our review closed pointing northwards. The All Share Index went up 0.52% to 1,510.58pts while, the Industrial Index added 0.54% to close at 4,985.46pts. The blue chips Index rose 0.37% to 977.24pts while, the resources index remained stable at 3,400.14pts. African Sun topped the gainers’ list on a 17.89% jump to $1.8500 as crocodile skin producers trailed with a 7.16% gain to $14.0000. Ariston advanced 5.47% to $1.3500 while, Axia improved 3.92% to $3.9995. Banking group ZB completed the top five winners of the day on a 2.26% rise to $17.5000.

The major casualty of the day was First Capital which shed 2.82% to end pegged at $0.5069 while, retailer OKZIM retreated 1.05% to $4.7419. Fintech group Cassava let go 0.45% to $3.8599 while, Zimplow slipped 0.41% to $4.8800. Art capped the top five shakers of the day on a 0.14% slide to $2.2900. The market closed with a positive breadth of two as twelve gained against ten losers. Activity aggregates were mixed in Friday’s session as volumes traded grew 15.67% to 9.58m while, turnover dipped 41.62% to $52.57m. Major volume contributors of the day were Econet (30.76%), Medtech (25.70%), Cassava (14.40%) and Delta (12.62%). Heavies Delta, Econet and Cassava claimed a combined 66.45% of the aggregate.-efesecurities

Global Currencies & Equity Markets

South Africa

Rand at best level in months as all eyes are on US election results

It is expected that volatility will continue until the election result is confirmed. Izak du Plessis asked Ricus Reeders of PSG Wealth why the rand is so sensitive about what happens in America.

It is widely believed that the outcome of the US presidential election could have a major impact on world economic growth.

According to a report from UBS that was released this week, a Democratic Party sweep with Joe Biden as the new US president is the optimum scenario for global growth.

UBS is a global firm providing financial services to private, corporate and institutional clients.

And as if to confirm this notion, the rand started trading below the key R16 to the dollar level, buoyed by the prospects of a Joe Biden win in the closely contested US presidential race.

The rand hit R15.83 to the dollar at around 20:35 on Wednesday night, its best level since the first week of March. It eased a bit to around R15.87 later – but was still trading over 1% stronger against the dollar on the day.

Before Wednesday the rand was going up and down as news of the election started trickling in. But even after the breakthrough on Tuesday, it was a seesaw day for the currency. The rand weakened some 2% in morning trade on Wednesday to R16.40 to the dollar at 09:50. However, it ended the day stronger and is likely to strengthen further this week if Biden wins.

Economists believe that a sustained break below R16.00 will open the door for the next big technical level of R15.75 against the dollar.

On Friday morning, when some crucial voter counts were still outstanding, the rand already broke through this level and traded at R15.74 to the dollar.

A Biden win is expected to see the dollar weaken as he has promised a larger Covid-19 US economic stimulus package. The Democrat leader is also anticipated to end Trump’s trade war with China.

However, it is expected that volatility will continue until the election result is confirmed and certainly there will be greater instability to come if the election is contested by Trump.

Nigeria

Naira continues to decline at black market despite huge dollar supply

At the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N465/$1 on Thursday.

Forex turnover improved significantly by 536.7% as Nigeria’s exchange rate at the NAFEX window maintained its stability against the dollar to close at N386/$1 during intra-day trading on Thursday, November 5.

Also, the naira depreciated further against the dollar, closing at N465/$1 at the parallel market on Thursday, November 5, 2020, as BDCs get another round of dollar supply from CBN.

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 N465/$1 on Thursday. This represents a N1 drop when compared to the N464/$1 that it exchanged for on Wednesday, November 4.

·         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 remained stable against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N386/$1.

·         The opening indicative rate was N385.94 to a dollar on Thursday. This represents an 11 kobo gain when compared to the N386.05 that was recorded on Wednesday.

·         The N393.51 to a dollar was the highest rate during intraday trading before it closed at N386 to a dollar. It also sold for as low as N380/$1 during intraday trading.

·         Forex turnover: Forex turnover at the Investor and Exporters (I&E) window rose sharply by 536.7% on Thursday, November 5, 2020.

·         According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $23.56 million on Wednesday, November 5, 2020, to $150.02 million on Thursday, November 5, 2020.

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

·         The sharp increase in dollar supply after the previous trading day’s drop 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 measures to check forex abuse and 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

Dollar Selling Continues Despite Solid NFP, Euro Surges

Dollar’s selloff continues today despite stronger than expected employment data. Though, selling focus has turned to against Euro and Swiss Franc. Australian Dollar is taking a breather, together with global stock markets. There is no doubt that Dollar will end as the worst performing one for the week, followed by Yen. Commodity currencies will stay end as the strongest ones.

Technically, EUR/USD break of 1.1880 resistance is another evidence of down trend resumption in Dollar. Further rise should now be seen to 1.2011 resistance for confirmation. USD/CHF has already taken the lead by breaking 0.8998 low. 0.7413 resistance in AUD/USD, and 1.2994 low in USD/CAD are the next levels to watch, probably next week.

In Europe, FTSE is up 0.13%. DAX is down -0.67%. CAC is down -0.56%. German 10-year yield is up 0.009 at -0.623. Earlier in Asia, Nikkei rose 0.91%. Hong Kong HSI rose 0.07%. China Shanghai SSE dropped -0.24%. Singapore Strait Times dropped -0.38%. Japan 10-year JGB yield rose 0.0009 to 0.022.

US NFP grew 638k in Oct, unemployment rate dropped to 6.9%

US non-farm payroll employment grew 638k in October, above expectation of 600k. Unemployment dropped sharply to 6.9%, down from 7.9%, well below expectation of 7.7%. Labor force participation rate also rose 0.3% to 61.7%. Average hourly earnings rose just 0.1% mom, below expectation of 0.2% mom.

Canadian job market grew 83.6k in October, above expectation of 59.0k. Most of the growth came from full-time work at 69k. Unemployment rate ticked down slightly by 0.1% to 8.9%.

>From Europe, Italy retail sales dropped -0.8% mom in September, better than expectation of -1.4% mom. Swiss foreign currency reserves rose slightly to CHF 871k in October. France trade deficit narrowed to EUR -5.7B in September. Germany industrial production rose 1.6% mom in September, below expectation of 2.9% mom.

Released in Asia, Japan labor cash earnings dropped -0.9% yoy in September versus expectation of -1.1% yoy. Household spending dropped -10.2% yoy, versus expectation of -10.7% yoy.

The measures announced on Tuesday included reduction in cash rate target and 3-year AGS yield target to 0.10%. Bedsides, measures include purchases of AUD 100B of government bonds of maturities from 5 to 10 years for the next 6 months.

On interest rate, RBA said “interest rates have been lowered as far as it makes sense to do so in the current environment… The board considers that there is little to be gained from short-term interest rates moving into negative territory and continues to view a negative policy rate as extraordinarily unlikely.”

In the new economic projections, RBA expected a shallower GDP contraction of -4% in the year ended 2020. But 2021 GDP rebound was kept unchanged at 5%. Unemployment rate would peak lower at 8% this year (versus 10%) and drop back to 6.5% by the end of 2021 (versus 6.5%). 2020 inflation was revised down to 0.50% then climb back to 1.0% in December 2021 (unchanged).

EUR/USD’s rally continues today and hits as high as 1.1890 so far. Break of 1.1880 resistance adds to the bullish case that consolidation from 1.2011 has completed at 1.1602. Intraday bias remains on the upside for 1.2011 and break will resume larger rally from 1.0635. On the downside, though, below 1.1791 minor support will mix up the outlook and turn intraday bias neutral first.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1422 resistance turned support holds.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold price rallies $50 as Biden maintains lead, markets look past litigation - TD Securities

(Kitco News) The precious metals surged on Thursday as markets looked past litigation threats and focused on the weaker U.S. dollar, according to TD Securities.

Democratic candidate Joe Biden continues to lead in the polls, with more clarity expected Thursday afternoon. The Electoral College count currently has Biden with 264 votes and Trump with 214.

States that are yet to be called are Arizona, Georgia, Nevada, Pennsylvania, North Carolina, and Alaska.

A weaker U.S. dollar is good news for gold, which has allowed the precious metal to make solid gains and to surge well above $1,900 an ounce. At the time of writing, December Comex gold futures were up 2.81% on the day, trading at $1,949.40 an ounce.

On top of the election news, markets are starting to price in the rise of coronavirus cases, which has negative consequences for economic recovery.

Investment flows into gold are also expected to pick up soon, with TD Securities advising to watch for the $1,940 an ounce level.-kitco.com

Oil fell a second day, dropping below $38 a barrel in New York

Oil fell a second day, dropping below $38 a barrel in New York, as a surging coronavirus and uncertain U.S. elections weighed on sentiment.

Futures dropped 2.7 per cent, with equity markets also lower as investors took risk off the market. Joe Biden appeared to be on the brink of victory in the presidential race – amid increasing numbers of legal complaints from incumbent Donald Trump –– but he may have to deal with a split Congress. Mounting coronavirus cases, with America becoming the first country to top 100,000 cases in a day, are also dragging oil lower.

Crude is ending a rough week with a decline after gains in the first half as the demand outlook turns more grim. Refineries across the U.S. and Europe have shut as a result of the pandemic and traders continue to brace for high volatility. Even though Asia is a bright spot, the OPEC+ group is considering whether to extend its current production cuts into next year to prevent a market glut.

Grow your business with the Daily Oil Bulletin – the trusted source for Canada’s oilpatch.

Prices

West Texas Intermediate for December delivery fell $1.05 to $37.74 a barrel at 10:10 a.m. in London

Brent for January settlement lost 96 cents, or 2.4 per cent, to $39.97

As refiners continue to struggle, Royal Dutch Shell plc said it will shut its 211,000 barrel-a-day Convent facility in Louisiana. It comes as the company plans to shrink its refining business after Covid-19 hammered global demand and profits.-Bloomberg L.P.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

Natfoods

AGM

Royal Harare Golf Club

09/11/2020 | 8:45am

Afdis

AGM

virtual

13/11/2020 | 12:20pm

Simbisa Brands

AGM

SAZ, Northend Close, Borrowdale, Harare as well as virtually on: https:/escrowagm.com/eagmZim/Login.aspx

20/11/2020 | 8:15am

Axia Corporation

AGM

virtual https://escrowagm.com/eagmZim/login.aspx

24/11/2020 | 8:14am

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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