Bulls n Bears Daily Market Commentary : 21 October 2020

Wed Oct 21 16:23:57 CAT 2020

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Bulls n Bears Daily Market Commentary : 21 October 2020

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ZSE commentary

ZSE maintains the positive momentum…

The market maintained the rising momentum in midweek trades as top capitalized stock CBZ continued to surge. The All Share Index added 1.11% to 1,516.33pts while, the Industrials were 1.2pts shy of the 5,000pts mark at 4,998.80pts. The ZSE Top Ten Index rose 1.68% to end at 988.51pts. Leading the market surge was apparel retailer Truworths which garnered 19.85% to settle at $0.1570. The duo of banks ZB and CBZ jumped 19.32% and 6.68% to close at respective prices of $17.7820 and $43.9130. Star Africa improved 5.88% to $0.1800 while, FMP completed the top five gainers of the day on a 2.17% gain to end pegged at $2.3500.

Headlining the fallers of the day was Proplastics which succumbed 20% to $4.7600, followed by Nampak that let go 15.75% to $0.8425. Zimpapers trimmed 5.72% to $0.6788 while, Ariston shed 1.48% to $1.3300. Axia wrapped the losers’ pack on a 1.38% slide to $3.7418. The Mining Index slipped 1.11% to 3,533.93pts weighed down by Bindura which retreated 1.35% to $3.6500. The risers and fallers spectrum was equally distributed at twelve apiece. Activity aggregates faltered in the session with volume of shares traded dropping 59.25% to 5.56m while, turnover was down 31.40% at $53.36m. Driving today’s volume were Delta, Willdale, Meikles and Econet with a combined contribution of 65.98% while, value outturn was anchored by Delta, Innscor and Meikles that made respective contributions to the aggregate of 37.59%, 27.13% and 11.81%. Foreign buys dipped 69.94% to $2.14m while, sales enhanced 3.80% to $29.10m to establish a net funds outflow position.-efesecurities

Global Currencies & Equity Markets

South Africa

South Africa's rand firms as U.S. stimulus hopes boost risk taking

JOHANNESBURG, (Reuters) - The South African rand firmed in early trade on Wednesday as investors who are optimistic that U.S. lawmakers could reach agreement on a pre-election coronavirus relief package sought out riskier currencies.

At 0610 GMT, the rand ZAR=D3 traded at 16.4575 versus the dollar, 0.14% firmer than its previous close.

U.S. President Donald Trump has raised hopes for a stimulus breakthrough, saying he was willing to accept a large aid bill, despite opposition from his own Republican Party.

With no top-tier data due locally this week, the rand has continued to be driven by global risk sentiment.

South Africa's currency and bonds offer some of the highest returns among emerging markets, and have remained attractive despite a frail economy and mounting fiscal risks.

Nigeria

Naira falls at black market, violence erupts across the country from #EndSARS protests

The naira depreciated against the dollar, closing at N463/$1 at the parallel market.

Nigeria’s exchange rate at the NAFEX window appreciated against the dollar to close at N385.75/$1 during intraday trading on Tuesday, October 20.

Also, the naira depreciated against the dollar, closing at N463/$1 at the parallel market on Tuesday, October 20, 2020, despite another round of forex allocation to BDCs by the CBN.

This is also as businesses shut down due to the outbreak of violence in some parts of the country including Lagos during the protest against the special anti-robbery unit (SARS) and police brutality by the Nigerian youth.

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 Tuesday. This represents a N1 drop when compared to the N462/$1 that it exchanged for on Monday, October 19.

 <mailto:info at bulls.co.zw> 

Global Market

Pound Sterling Bid against Euro and Dollar on Fresh Barnier Commitments

The British Pound advanced in mid-week trade in the wake of a fresh overture from the EU's Chief Negotiator Michel Barnier, which have raised the prospect of talks restarting and a deal being agreed over coming weeks.

Barnier told the European Union parliament on Wednesday the EU was committed to making the necessary compromises required to agree a deal, thereby meeting the UK's demand that the EU signals a 'fundamental' shift in approach to negotiations.

The UK has this week resisted committing to further rounds of talks in the wake of last week's European Council requirement that the UK makes the necessary compromises to achieve a deal, which prompted Prime Minister Boris Johnson to accuse the EU of a fundamental unwillingness to compromise.

The UK's decision to hold up talks - despite an alarmingly short period of time remaining in which to reach a deal - appears to have prompted some movement away from the one-sided approach signalled by the EU last week. Indeed, Barnier's latest comments form the second overture made to the UK this week as Barnier met some of the UK's additional demands on Monday by agreeing to begin discussions on a legal text. 

The UK signalled this was not enough to get talks going again and Sterling retreated from recent highs.

But Sterling's reaction on Wednesday suggests a belief by markets that talks will soon resume, and that the two sides are performing a ritualistic dance before striking an inevitable compromise.

The Pound-to-Euro exchange rate rose half a percent to reach 1.10 while the Pound-to-Dollar exchange rate rose by 0.80% to reach 1.30.

Sterling was seen higher against all its major G10 peers in the wake of the developments, confirming an idiosyncratic driver behind the move.

A spokesperson for the Prime Minister's office responded to Barnier's latest comments by confirming the UK's Chief Negotiator David Frost would be speaking with Barnier at some point later in the day.

The spokesperson said the UK noted "with interest" Barnier's "significant" comments on issues behind current difficulties in trade talks.

That the UK side sees "significant" comments is all the market will require to bid Sterling on the assumption trade talks will be restarting soon and that moves will be made on both sides for a deal to be reached.

Talks are expected to continue this week and could very well drag into the end of the month or even early November," says a weekly currency briefing from Barclays. 

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold Prices Rise as the Dollar Turns Lower Following Mixed Housing Data

Gold prices moved higher on Tuesday, as the dollar headed south. US yields moved higher following a stronger than expected increase in US Single-Family Housing Starts. Nancy Pelosi the US House of Representatives Speaker that the White House and she were getting closer to a stimulus deal. Gold volatility has eased and is currently trading near the lowest levels seen since the pandemic started to spread in February just shy of 21%.

Technical analysis

Gold prices moved higher and are poised to test resistance is seen near the 50-day moving average at 1,925. Short term support is seen near the 10-day moving average at 1,905. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal on the upper end of the neutral range. Medium-term momentum remains neutral to positive as the MACD histogram prints in the black with an upward sloping trajectory that points to a slow trend higher.

Copper price surges to 28-month high

The copper price was trading at its highest since June 2018 on Tuesday on hopes of a US stimulus package, worries about supply from top producer Chile and robust Chinese economic growth. 

On the Comex market, copper for delivery in December jumped 2.7% to $3.1705 a pound ($6,990 a tonne) in brisk trade, with more than 1.8 billion pounds of the most active contract traded by 1pm in New York. 

Tuesday’s trading brings the bellwether metal’s recovery since the height of the covid-19 induced sell-off, which sent the copper price crashing to below $2.00 a pound, to 63%.

US House Speaker Nancy Pelosi said she believed stimulus legislation could be pushed through before the US Presidential election in two weeks’ time.

Workers at Chile’s state-run Codelco, the world’s largest copper producer, took to the streets on Monday to reject layoffs announced by the company during the pandemic.

Lundin Mining suspended operations at its Candelaria copper mine Tuesday after two of its unions called on their workers to begin strikes.

Industrious China

China consumes more industrial metals than the rest of the world combined and data released Tuesday showed the country’s refined copper output rose 10.3% year-on-year in September.

Daily average output of copper during the month was 30,300 tonnes per day, matching the November 2019 record set before the pandemic took hold.

Smelters’ average daily production zinc and lead has also recovered to the record level attained at the end of 2019.

China’s economy continued its rapid rebound in the third quarter, with activity across a range of sectors. GDP expansion accelerated to 4.9% during Q3, up from 0.7% in the quarter to end-June.

Metal intensive industries showed the strongest growth, with a further pick-up in industry and construction last quarter, from 4.7% year on year to 6%.

In a note, Capital Economics said monthly data show momentum is building going into the final quarter of 2020.

Industrial production came in way above expectations, rising from 5.6% in August to 6.9% in September compared to the same months last year. Fixed investment expanded 0.8% year-to-date, implying that capital spending grew 7.6% in September.

Julian Evans-Pritchard, Capital Economics Senior China Economist, said the economy is becoming less reliant on investment-led stimulus and that growth will continue to pick-up in the near-term:

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

Falgold

EGM

1st Floor, KPMG Building, 133 Josiah Tongogara Avenue, Bulawayo

29/10/2020 | 10:00 am

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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