Bulls n Bears Daily Market Commentary : 22 October 2020

Thu Oct 22 15:55:24 CAT 2020

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Bulls n Bears Daily Market Commentary : 22 October 2020

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ZSE commentary

ZSE swings into the red…

Banking group CBZ swung the market back into the red after the group succumbed 11.18% to close at $39.0044. Nickel miner Bindura dropped 11.74% to end at $3.2214. Resultantly, the Mining Index retreated 10.59% to 3,195.01pts. Ariston let go 6.02% to $1.2500 while, Axia trimmed 5.52% to settle at $3.5351. Apparel retailer Truworths shed 5.35% to $0.1486 reversing previous day gains. Telecoms giant Econet retreated 1.80% closing at $4.2760. Gainers of the day were led by Dairibord which gained 6.51% to settle at $9.0000, trailed by Proplastics that added 3.49% to $4.9259. Nampak improved 1.23% to $0.8529 while, banking group ZB ticked up 0.63% to $17.8948. Beverages group Delta completed the top five winners of the day on a 0.57% rise to $15.0677.

The market recorded a negative market breadth of three as nine counters rose against twelve that lost the ground. Volume of shares traded plunged 41.49% to 7.98m yielding a turnover of $45.58m which 41.40% lower than prior session. Axia, Medtech and Zimplow anchored the volume aggregate of the day as the trio claimed a combined 62.20%. Foreign inflows for the day amounted to $7.36m while, outflows stood at $12.75m leaving the market with a net funds outflow of $5.39m. Top value drivers of the day were Axia (22.59%), ZB (20.20%), CBZ (13.48%), Delta (10.88%) and Zimplow (10.15%). The mainstream All Share Index slipped 1.15% to 1,482.47pts while, the  ndustrials lost 0.83% to 4,899.35pts. The ZSE Top Ten Index declined 1.45% to 958.17pts. –efesecurities

Global Currencies & Equity Markets

South Africa

South Africa's rand slips on subdued risk taking

JOHANNESBURG, (Reuters) - South Africa's rand slipped early on Thursday from a one-month high hit in the previous session, as the slow pace of U.S. stimulus talks weighed on appetite for riskier assets, such as emerging markets currencies.

At 0600 GMT, the rand ZAR=D3 traded at 16.3700 against the U.S. dollar, 0.28% down from its previous close.

Against the backdrop of a weak local economy, the rand has in recent weeks mainly been driven by offshore sentiment, particularly the outlook for further monetary and fiscal stimulus for the world's major economies.

On Wednesday, the currency firmed to 16.2575, its strongest since Sept. 18, as risk-taking globally was boosted by hopes of a breakthrough in stimulus talks in the United States.

But global investor sentiment worsened after U.S. President Donald Trump on Wednesday accused Democrats of refusing to craft an acceptable compromise, following reports of progress earlier in the day.FRX

South African government bonds firmed in early trade, with the yield on the benchmark 2030 bond ZAR2030= down 0.5 basis point to 9.29%.

Nigeria

Naira stabilizes in forex markets as dollar supply hits record low during curfew

Naira maintains stability at forex markets as dollar supply rise by 57%, Exchange rate, dollar, Foreign Direct Investment, Global Investment, Naira appreciates at I & E window, hits N384 to $1

Forex turnover hit record low dropping by 81.5% as Nigeria’s exchange rate at the NAFEX window remained stable against the dollar to close at N385.75/$1 during intraday trading on Wednesday, October 21.

Also, the naira remained stable against the dollar, closing at N463/$1 at the parallel market on Wednesday, October 21, 2020, as the imposition of the curfew bits hard on businesses.

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 remained stable against the dollar to close at N463/$1 on Wednesday. This was the same rate that it exchanged for on Tuesday, October 20.

·         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 measure

·         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.

This was the same rate that it exchanged for on Tuesday, October 20.

The opening indicative rate was N386.24 to a dollar on Wednesday. This represents a 14 kobo gain when compared to the N386.38 that was recorded on Tuesday.

The N386 to a dollar is the highest rate during intraday trading. It also sold for as low as N384/$1 during intraday trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window hit record low as it declined by 81.5% on Wednesday, October 21, 2020.

·         According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $32.67 million on Tuesday, October 20, 2020, to $6.05 million on Wednesday, October 21, 2020.

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

·         The continuous drop in forex supply 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 August was about $857 million, compared to $937 million in July.

·         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.

·         According to Reuters, currency traders said that the naira is expected to be stable this week as banks limit foreign exchange transactions by both firms and individual buyers on the unofficial black market to curb speculation

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Global Markets

US Dollar Index looks firmer and approaches 93.00, looks to the debate

The US Dollar Index (DXY), which measures the buck vs. a bundle of its main rivals, keeps the upbeat mood unchanged and trades at shouting distance from the 93.00 mark.

US Dollar Index regains traction near 93.00

After testing fresh multi-week lows in the mid-92.00s on Wednesday, the index has managed to regain composure and is now flirting with the key barrier in the 93.00 neighbourhood.

Negotiations around extra stimulus have stalled in past hours and this gave the greenback enough reason to reclaim ground lost and the risk aversion the possibility to return to the markets. On the latter, cautiousness keeps growing ahead of the final presidential debate between President Trump and Democrat candidate Joe Biden.

Supporting the dollar, the weekly report on the US labour market showed Initial Claims rose by 787K WoW during last week, the first sub-800K reading since the start of the pandemic back in late March.

Later in the calendar comes in the September’s Existing Home Sales ahead of the speech by Richmond Fed Thomas Barkin (2021 voter, centrist).

What to look for around USD

The index remains well under pressure, particularly after breaking below the 93.00 mark in past hours and recording new multi-week lows on Wednesday. The move lower came in tandem with increasing hopes of extra stimulus, although this view has lost some vigour lately. In the meantime, and also weighing on the buck, bets of a “blue wave” win at the presidential elections next month remain on the rise. The fragile view on the dollar is also reinforced by the “lower for longer” stance from the Federal Reserve.

US Dollar Index relevant levels

At the moment, the index is gaining 0.25% at 92.85 and a break above 93.90 (weekly high Oct.15) would expose 94.20 (38.2% Fibo retracement of the 2017-2018 drop) and finally 94.74 (monthly high Sep.25). On the other hand, immediate contention is located at 92.47 (monthly low Oct.21) followed by 91.92 (23.6% Fibo of the 2017-2018 drop) and then 91.80 (monthly low May 2018).

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold Battles with Resistance, Silver Respects Supportive Trend

Gold continues to print fresh short-term higher lows and the precious metal is currently trapped between the supportive 20-day simple moving average (sma) at $1,905/oz. and resistance off the 50-day sma around $1,921/oz. A break to the downside exposes $1,882/oz. while a break higher will see the 23.6% Fibonacci retracement at $1,928/oz. and the one-month high at $1,934.5/oz. come into play. The CCI indicator suggests that gold is overbought for the first time since early August.

IG retail trader datashow 79.05% of traders are net-long with the ratio of traders long to short at 3.77 to 1.The number of traders net-long is 0.11% lower than yesterday and 4.13% lower from last week, while the number of traders net-short is 9.59% lower than yesterday and 8.29% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Gold trading bias.

The short-term supportive trendline continues to guide silver higher, with the 20-day sma acting now as secondary support. We noted the pennant formation nearing its apex at the end of last week and the subsequent break higher now suggests that silver may have more room to run. The 50-day sma at 25.41 is the first level of resistance followed by the multi-week high off the indecision doji at 25.60. Above here a cluster of prior highs between 27.00 and 27.70. To the downside, trend support at 24.50 ahead of 20-sma at 24.26 and 23.56.

IG retail trader data show 86.03% of traders are net-long with the ratio of traders long to short at 6.16 to 1. The number of traders net-long is 3.12% lower than yesterday and 7.86% lower from last week, while the number of traders net-short is 15.12% higher than yesterday and 17.39% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Silver prices may continue to fall.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Silver price trend may soon reverse higher despite the fact traders remain net-long.

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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