Bulls n Bears Daily Market Commentary : 12 November 2020

Fri Nov 13 09:02:54 CAT 2020

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Bulls n Bears Daily Market Commentary : 12 November 2020

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ZSE commentary

Delta buoys ZSE gains

Delta garnered 13.17% to close at a vwap of $16.9999 in the wake of its 1H21 results, in which a PAT of $3.2bn was reported against $0.89bn in the prior comparable period. The beverages group declared an interim dividend of $0.4500 per share. 

Delta drove the volume and value aggregates of the day claiming 66.79% of the former and 30.52% of the latter. Other notable value drivers of the day were Innscor, Turnall and SeedCo Limited with a combined contribution of 39.21% of the aggregate. 

Volume of shares traded dropped 30.92% to 22.16m while, turnover advanced 28.60% to $70.80m. The market closed with a positive breadth of ten as seventeen counters gained against seven losers.

Star Africa surged 19.05% to $1.2500 while, Hippo put on 14.29% to $16.0000. Apparel retailers Truworths ticked up 3.57% to $0.1450 as banking group First Capital improved 2.78% to $0.5173, reversing previous day losses.

Headlining the fallers’ pack was Ariston which shed 3.57% to $1.2500, trailed by conglomerate Innscor that lost 2.82% to $25.9798. Fintech group Cassava slipped 2.05% to $3.7611 as brick manufacturers Willdale trimmed 1.10% to $0.2338. Telecoms giant Econet capped the shakers of the day on a 0.61% loss to $3.9598. The All Share Index added 1.46% to 1,563.02pts while, the Industrials enhanced 1.51% to 5,162.47pts. 

The ZSE Top Ten Index firmed 1.73% to 1,017.72pts while, the Mining Index was stable at 3,430.75pts.-EFE Securities

Global Currencies & Equity Markets

South Africa

Rand trades on the back foot after President’s address

JOHANNESBURG - The local currency traded softer as South Africans awaited President Ramaphosa’s evening address with abated breath, although lingering global risk-on mood softened the impact of domestic developments according to NKC Research.

Local news was dominated by reactions to ANC secretary-general Ace Magashule’s arrest warrant – which was issued on Tuesday – with the ruling ANC affirming he has not been asked to step down, despite pressure from within the party rising to flush out “corrupt elements.”

At the close of local trade, the rand quoted 0.39 percent weaker at R15.69/$, after trading in range of R15.53/$ - R15.73/$.

South African bourse

The JSE All Share (-0.11 percent) slowed yesterday following its vaccine-fuelled run this week. In the overall emerging market sphere, the MSCI Emerging Market Index (-0.44 percent) traded lower. Though EMs suffered more damage in the equity markets and have recovered less losses since the pandemic outbreak, their financial markets are shallower. EMs’ real economies depend more on conventional bank lending and are less sensitive to asset prices.

Brent crude oil

The Brent oil price continued to trade on the front foot yesterday after US crude stockpiles fell by 5.1 million barrels last week to about 482 million barrels, according to the latest American Petroleum Institute data. At the close of local trade, benchmark Brent crude futures quoted 3.61 percent higher/lower at $44.73pb. Crude prices were flat during Asian trading.-BUSINESS REPORT ONLINE

Nigeria

Naira falls across forex markets, demand pressure increases despite huge dollar supply

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday.

Forex turnover rose by 45.5% as Nigeria’s exchange rate at the NAFEX window depreciated against the dollar to close at N385.83/$1 during intra-day trading on Wednesday, November 11.

Also, the naira depreciated against the dollar, closing at N466/$1 at the parallel market on Wednesday, November 11, 2020, as demand pressure increases in the forex market.

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 N466/$1 on Wednesday.

This represents a N1 drop when compared to the N465/$1 that it exchanged for on Tuesday, November 10.

The local currency had strengthened by about 7.8% within one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers.

This was so as 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 depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N385.83/$1.

·         This represents a 16 kobo drop when compared to the N385.67/$1 that it exchanged for on Tuesday, November 10.

·         The opening indicative rate was N385.99 to a dollar on Wednesday. This also represents a 16 kobo drop when compared to the N385.83 that was recorded on Tuesday.

·         The N393.43 to a dollar was the highest rate during intra-day trading before it closed at N385.83 to a dollar. It also sold for as low as N381/$1 during intraday trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window rose by 45.5% on Wednesday, November 11, 2020.

·         According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $140.95 million on Tuesday, November 10, 2020, to $205.05 million on Wednesday, November 11, 2020.

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

·         The 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.

·         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.

·         A financial expert and Managing Director of Financial Derivatives had stated that he expects the exchange rate at the parallel market to likely depreciate to N470-N475/$1 in November and December due to low oil prices that will further limit foreign exchange supply.

 <mailto:info at bulls.co.zw> 

Global Markets

Dollar dips, euro bumps higher as sentiment see-saws

The dollar dipped on Thursday as investors appeared to waver between optimism and caution over expectations about a COVID-19 vaccine that is unlikely to avert a grim winter in Europe and the United States as the pandemic’s second wave intensifies.

The dollar index was down 0.15% by midday in London, off earlier lows as risk appetite rebounded a little from Asian trading hours. U.S. stock futures pared some of their losses in the run up to the start of trading in New York.

The risk-sensitive Australian and New Zealand dollars made up some ground, last trading only about 0.1% lower.

After an initial fall, the euro bumped higher by 0.3% to $1.1823.

Foley added, however, that in the run up to the European Central Bank meeting in December the market may feel a little uncomfortable with long positions on the euro, particularly as Q4 economic data for the euro zone comes through, which she said would be “undoubtedly poor”.

Europe is grappling with surging infections and new COVID-19 restrictions, with Germany’s economic advisers trimming next year’s growth outlook. New York has ordered bars and restaurants to close early as U.S. cases hit record levels.

Sterling licked its wounds as trade talks between Britain and the European Union seemed set to drag on past yet another deadline, raising the prospect that no trade deal may be reached before Brexit transition arrangements end on Dec. 31.

The British currency last traded 0.4% lower to the dollar at $1.3167.

The moves in the past week have for now put the brakes on a long drop for the dollar, which had shed about 10% against a basket of currencies between March and the announcement of progress on Pfizer’s COVID-19 vaccine on Monday.

Larger moves were held in check as investors await speeches from Federal Reserve Chair Jerome Powell, European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey at a central banking forum on Thursday.

KIWI HOVERS

Before a cautious mood spilled over from equities trade into the currency markets, the kiwi made a fresh 20-month high versus the U.S. dollar as traders became less convinced that negative rates are a sure thing for New Zealand.

Bond markets moved sharply across the curve to price longer odds on that possibility on Wednesday, and yields inched higher on Thursday as the New Zealand currency rose to $0.6915. It had last fallen back to trade 0.16% lower on the day at $0.6870.

ANZ Bank still thinks New Zealand rates will head below zero in August 2021, but said it’s now “become a bit of a toss up” and that it is clear that going negative is no longer urgent.

Along with the virus, U.S. President Donald Trump’s refusal to concede defeat to Democrat Joe Biden in last week’s election is also beginning to jangle investors’ nerves.

CBA analysts in Sydney say a 5% leap in the greenback is possible if Trump does find a way to stay in office, most likely by relying on electoral college delegates to cast votes for him even if their states endorsed Joe Biden at the ballot box.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold is still inching toward record high levels despite volatility

New York (CNN Business)Gold prices tumbled on Monday after the Pfizer-BioNTech coronavirus vaccine news sparked a broader market rally. Investors fled safe haven assets like gold, which had surged on worries about the pandemic.

But the price of the gold is still hovering just under $1,900 an ounce — not far from all-time highs above $2,000 earlier this year.

While gold has been volatile, it has benefited from many of the same trends that have lifted bitcoin as well as silver, platinum and other precious metals the past few months. And many analysts are confident gold will just keep on climbing.

The Federal Reserve is likely to keep rates low, even in a Joe Biden administration That will hurt the dollar and make alternative currencies more attractive.

More stimulus would bolster the economy, and that could push gold even higher as many investors use it as an inflation hedge.

Hedge against low rates and dollar weakness

Beyond just being a good option for investors who are wary of the dollar, gold also could be a good substitute for bonds.

While the yield on the US 10-year Treasury has ticked up slightly lately, it still remains below 1%. Bond yields in Europe are negative, and they are barely above zero in Japan and the UK.

Gold prices may still have more dips in the near term, especially if more promising vaccine news emerges.

But the likely absence of stimulus from Congress before Biden takes office on January 20 would weaken the economy, making gold more attractive.

Safe haven trade and eventual inflation to boost gold further?

Nonetheless, Millman told CNN Business he thinks gold could hit a new high of around $2,100 an ounce in 2021.

Fosterville South's Slusarchuk is even more bullish, saying that there is a "compelling case" for gold to reach $2,500 an ounce.

A lot may depend on just how much stimulus President-elect Biden and Congress will be able to pass early next year. Control of the Senate is still up for grabs, too, because of runoffs for both of Georgia's seats.

Abrams: Dems can 'absolutely' win likely Georgia Senate runoffs

Abrams: Dems can 'absolutely' win likely Georgia Senate runoffs 02:49

A multi-trillion dollar stimulus deal — which could potentially include more funds for infrastructure spending as well as Covid relief — could boost the job market and kick the economy into a higher gear.

If that happens, investors may start wondering if inflation will finally return.

Gold prices often rise during times of inflation because it is viewed as a hedge against a decline in the purchasing power of a dollar when the economy strengthens.

A rebounding global economy could also boost gold prices for the simple reason that consumers, particularly those in emerging markets like India and China, may look to buy more of it.

After all, gold is not just used by investors and central banks to hedge against interest rate and currency fluctuations. The World Gold Council's Artigas said about 40% of demand for gold is tied to jewelry sales as well as some industrial uses.

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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