Bulls n Bears Daily Market Commentary : 26 November 2020

Thu Nov 26 17:56:58 CAT 2020

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Bulls n Bears Daily Market Commentary : 26 November 2020

 <http://www.zb.co.zw/> 

ZSE commentary

ZSE retreats further.

The ZSE retreated further in Thursday's session with the mainstream All
Share Index closing lower at 1,565.90pts after shedding 0.52% while, the
Industrial Index went down 0.53% to close at 5,193.48pts. The blue chips
lost 0.70% to end at 1,007.94pts while, the Mining Index let go 0.01% to
2,975.40pts. Risers of the day outnumbered fallers by a count of four to
register a positive market breadth. Banking group NMB dipped 12.53% to
$2.1004 while, insurance group FML tumbled 11.53% to settle at $4.2000.
Powerspeed slipped 8.02% to $1.9019 reversing previous day gains while,
apparel retailer Edgars trimmed 4.70% to $0.9530. Top capitalised stock
Delta dropped 4.61% to end at a vwap of $17.3989.

Gainers of the day were headlined by Unifreight which surged 19.69% to
$0.1550, trailed by construction concern Masimba that jumped 17.16% to
$4.2116. Star Africa put on 7.05% to $0.2914 while, First Capital added
5.12% to close at 0.6205. Property concern FMP capped the top five winners
of the day on a 4.76% lift to $2.2000. Activity aggregates continued to
weaken as volumes traded declined 78.69% to 3.84m while, value outturn
succumbed 73.74% to $22.44m. Econet and Masimba were the top volume drivers
of the day with respective contributions of 32.96% and 30.46% of the total.
Top value drivers were Econet, Delta, Masimba and Innscor which claimed a
combined 91.96% of the outturn. Local purchases accounted for 76.88% of the
outturn while, sales claimed 72.01% of the same. Elsewhere, Meikles released
its HY21 results in which a PAT of $189.34m was reported and an interim
dividend of $0.4250 was declared. efesecurities

Global Currencies & Equity Markets

South Africa

The rand just hit its best level in nine months - here's why

On Thursday morning, the rand was trading at around R15.11 - its best level
since 26 February, exactly nine months ago. It was also stronger against the
euro (R18.02) and pound (R20.23).

The currency has been under massive pressure in recent months, blowing out
to R19.26 in the first week of April - shortly after South Africa went into
a hard lockdown, and the ratings agency Moody's downgraded the country to
"junk".

Last week, Moody's and Fitch cut SA further into junk, voicing concern about
the ballooning government debt, with little confidence that the state will
fail to make good on its promises to cut spending on civil servant wages.

So why is the rand rallying?

Dollar weakness

The markets believe US president-elect Joe Biden's government will be less
unwilling than the Republicans to pump billions in stimulus into the US
economy. This means more US government debt, which is negative for the
dollar in the longer run.

Biden is also expected to stop the American trade war with China and others.
This will mean more imports to the US, which could also weigh on the dollar.
US importers will have to sell dollars to pay for goods in another currency.

The dollar - a safe-haven investment in times of tumult - could also weaken
if the US gets a less erratic leader. US president Donald Trump has
introduced a large element of uncertainty in markets over the past four
years with his shock pronouncements, specifically on trade and international
relations.

High interest rates in South Africa

Traders are attracted to currencies which earn higher interest rates, and
even though rates have been cut to the lowest levels in half a century in
South Africa, the benchmark rate of 3.5% is still far better than what is on
offer from most other major currencies. Many countries now have negative
interest rates of below zero percent.

And interest rates are not expected to go lower in SA any time soon - this
week, new consumer inflation numbers hit a seven-month high, which may
dissuade the Reserve Bank from relaxing its monetary policy.

Bigger appetite for emerging market currencies

For many months, investors have been fretting about the coronavirus pandemic
and its impact on the world economy. They have been very risk averse -
choosing to buy "safe" investments like gold, US bonds and the dollar. But
recent good news about Covid-19 vaccines has boosted confidence that the
worst of the crisis might be over. Their risk appetite has increased and
emerging market currencies are back on the menu.

South Africa's current account is looking better than in years

If more money flows out of, than into, a country - it's bad for its
currency.

The flows out of a country is measured by the current account, and because
South Africa imports most of its oil, and pays huge amounts in interest and
dividends to foreigners outside the country, the country has maintained a
large current account deficit (of as much as 6% of GDP) for many years.

The oil price tanked during the pandemic, and foreign investment in SA bonds
and shares has dwindled in recent years - which means less interest rate and
dividend payments going overseas.

Also, South Africa has seen record harvests and its agricultural exports
have been strong. And because of the depressed local economy, imports of
machinery and other expensive goods have been weak. So where we usually
import more than we export - this changed in 2020:

There aren't almost any current account deficits in EM right now. Recession
erased them. Under the hood, positive CAs reflect surging net savings in the
private sector offset by wide fiscal deficits (so public sector filling in
the domestic demand gap).

The most recent The Economist's Big Mac Index, released in July, showed that
the rand is a whopping 67% cheaper than it theoretically should be against
the dollar - the worst undervaluation of all the currencies measured.

The Big Mac Index is based on the theory of purchasing-power parity. In the
long run, theoretically, exchange rates ought to adjust so that an identical
product - the McDonald's hamburger - must cost the same across countries.

While the vast majority of currencies were also undervalued to the dollar -
Brazil by 32%, Argentina (-39%), India (-56%) and Turkey (-64%) - none beat
the rand. The rand was even weaker than the Russian rouble (-66.5%)

As recently as a decade ago, the rand was "only" undervalued by 39% against
the dollar, according to the Big Mac index.-businessinsider.co.za

Nigeria

Nigerian naira eases on black market

Nigeria's naira currency eased on the black market on Wednesday, traders
said, after the central bank said the small size of the unofficial market
means it should not be used to determine the naira's value.

(Reuters) - Nigeria's naira currency eased on the black market on Wednesday,
traders said, after the central bank said the small size of the unofficial
market means it should not be used to determine the naira's value.

Central Bank Governor Godwin Emefiele on Tuesday responded to calls for
further depreciation of the naira, which has weakened by 28% this year, by
saying the black market rate should not be used to determine the naira's
value.

The naira has come under pressure because central bank policies restrict
access to the official window, thereby funneling demand to a black market
that holds less than 5% of trades and patronised mostly by those without
proper documentation.

The naira was around 485-487 against the dollar on the black market on
Wednesday after reaching 483 earlier in the day, traders said. It has been
stuck at 381 per dollar on the official market since July - at a 21%
discount to the black market rate.

Nigeria has been hard hit by the impact of coronavirus pandemic, which has
led to a collapse in the price of oil, its main export. That has hammered
government revenue, weakened the naira and created dollar shortages in the
country.

The central bank has been selling dollars to foreign investors seeking to
repatriate funds and to clear a backlog, but demand is swelling as importers
seek dollars to buy goods ahead of Christmas sales, traders say.

The naira traded at 387.67 on the over-the-counter official spot market
NAFEX=FMDQ, quoted by investors and importers, on thin volumes.

 <mailto:info at bulls.co.zw> 

Global Markets

GBP/USD flirts with three-month top as US dollar weakness battles Brexit,
covid woes

Having rallied for consecutive nine-day, GBP/USD bulls catch a breather
around 1.3390 while heading into Thursday's London open. In doing so, the
quote stays near the fresh high since September 02 of 1.3397, marked earlier
in Asia. While receding Brexit optimism and the UK's covid fears tame the
bulls, the US dollar's losses outweigh everything amid a quiet session on
Thanksgiving Day.

The UK Finance Minister Rishi Sunak's effort to tame the biggest budget
deficit since world war two couldn't disappoint the Cable buyers the
previous day as the US dollar index (DXY) dropped to a fresh low since
September 01. Not only the downbeat data but risk-on mood also negatively
affected the greenback on Wednesday.

On the other hand, the European Commission head, Ursula von der Leyen,
showed readiness to walk away with no trade deal while France also sounded
grumbling over the fisheries issues. Though, Ireland's PM Micheal Martin
seemed hopeful in recent comments.

Elsewhere, the UK's covid-related death toll surged by 696 to 56,533, the
highest daily jump since May 5, on Wednesday. Even so, UK PM Johnson kept up
the mood to celebrate Christmas.

It should be noted that the US-China tussle is back in focus with both the
nations missing on the trade promises even after 10 months of the
much-cheered deal. Also, the American government sanction on four companies
from China and Russia, concerning the Iran missile program, spoils the mood.

However, futures stay mildly positive amid vaccine hopes and a light
calendar due to the US holidays. GBP/USD bulls are likely to stay on the
driver's seat as the DXY remains pressured and the Brexit hopes, despite
receding off-late, remain on the table.

Technical analysis

Overbought RSI conditions tease bears to look for entries below an upward
sloping trend line from November 02, at 1.3360.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Copper hits near 7-year high on vaccine hopes, fund buying

(Reuters) - Copper rallied to its highest in nearly seven years on Thursday
on hopes that a vaccine for the coronavirus would galvanise global markets
and boost demand for the industrial metal.

Three-month copper on the London Metal Exchange was up 1% to $7,370.50 a
tonne in official trading, after hitting $7,410 a tonne, its highest since
Jan. 2, 2014.

The metal, widely used in power and construction industries, has rallied
about 70% since its March lows.

AstraZeneca, Pfizer-BioNTech and Moderna have all reported positive results
in their coronavirus vaccine trials.

A softer dollar also buoyed metals, as it makes commodities priced in the
currency more attractive to holders of other currencies..

POSITIONING: Speculators bet on prices rising further, with the net spec
long in LME copper at 20.4% of open interest as at Tuesday's close, highs
not seen since 2017, according to broker Marex Spectron.

COPPER INVENTORIES: On-warrant copper stocks in warehouses monitored by the
LME hit their lowest in two months, down 600 tonnes to 102,425 tonnes.
MCUSTX-TOTAL

COPPER PREMIUMS: The Yangshan copper premium SMM-CUYP-CN climbed to $52 a
tonne, compared with an April 2017 low of $46 a tonne touched two weeks ago,
pointing to an uptick in China demand.

SCRAP METAL: A surge in scrap metal usage could slash global demand for
primary aluminium and copper, Wood Mackenzie said.

ALUMINIUM: The price difference between three-month aluminium contracts on
the ShFE and LME hit $138.80 a tonne, the highest since February 2014.

OTHER PRICES: LME aluminium rose 0.4% to $1,978 a tonne, zinc gained 0.6% to
$2,771, lead added 0.8% to $2,046.50, tin climbed 0.2% to $18,780, while
nickel was steady at $16,073.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

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
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for guideline purposes only and sourced from third parties.

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