Bulls n Bears Daily Market Commentary : 30 October 2020

Fri Oct 30 15:49:11 CAT 2020

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Bulls n Bears Daily Market Commentary : 30 October 2020

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ZSE commentary

ZSE falters in month-ending session…

The ZSE faltered in the last session of the month weighed down by losses in selected heavies. Three of the benchmark Indices in our review closed in the red as the mainstream All Share Index let go 0.43% to close at 1476.87pts while, the Industrial Index shed 0.62% to 4852.49pts. The ZSE Top Ten Index retreated 0.70% to settle at 937.28pts. Crocodile skin producers Padenga topped the shakers of the day after dropping 4.39% to $13.0093. Trailing was banking group ZB that trimmed 4.06% to $17.0000. Hotelier African sun lost 3.23% to $1.6300 while, property concern FMP slipped 2.13% to $2.3000. Fintech group Cassava capped the top five losers of the day on a 1.18% retreat to close at $4.0001. Other notable fallers were Econet (-1.12%), Innscor (-0.69%), Delta (- 0.60%) and OKZIM (0.52%).

Gains were registered in three counters led by General Beltings which jumped 13.33% to $0.1700, followed by Bindura which extended 6.53% to $3.8352. Construction group Masimba added 0.07% to close the session at $2.5519. Twenty-six counters were active in Friday’s session distributed as three gainers, eighteen fallers and five that traded unchanged as the market closed with a negative breadth of fifteen. Volumes of shares traded jumped 94.47% to 8.05m, yielding a turnover of $33.97m which was a 103.23% balloon from prior session. Driving today’s volumes were Econet, Medtech and Star Africa which contributed 45.62%, 15.93% and 11.47% to the aggregate in that order. Econet, Innscor and Padenga anchored the value outturn of the day after claiming a combined 80.50% of the aggregate. Foreign outflows stood at $5.62m while, inflows amounted to $0.47m as the capital flight continued.

Global Currencies & Equity Markets

South Africa

Rand up slightly despite Fitch’s warning

JOHANNESBURG - During European trade the South African rand recovered some mini-budget-related losses – as unconvincing fiscal roadmap undermined confidence – incurred during yesterday’s overnight session according to NKC Research.

Fitch Ratings warned on Thursday that the plan to freeze public sector wages, as laid out in the budget policy statement on Wednesday, will face strong pushback from labour unions, while “tensions within the governing ANC will also hamper policy-making and exceptionally high inequality raises social pressure for additional spending.”

At the close of local trade, the rand quoted 0.04 percent stronger at R16.34/$, after trading in range of R16.27/$ - R16.48/$. The rand was steady overnight. Expected range today R16.20/$ - R16.50/$.

South African bourse

The JSE All Share (-0.79 percent) ended lower yesterday, dragged by losses in large financial (-2.69 percent) stocks. In the overall emerging market sphere, the MSCI Emerging Market Index (0.06 percent) traded lower.

Brent crude oil

The Brent oil price dropped to its weakest level in five months as new lockdown measures imposed across the West painted a bleak outlook for the energy sector. At the close of local trade, benchmark Brent crude futures quoted 3.24 percent lower at $37.90pb. Crude prices tried to recover during Asian trade this morning.-BUSINESS REPORT ONLINE

Nigeria

Naira falls at black market as dollar supply drops

At the black market,  the Naira depreciated against the dollar to close at N465/$1 on Wednesday.

Forex turnover drops by 47.5% as Nigeria’s exchange rate at the NAFEX window appreciated against the dollar to close at N385.67/$1 during intra-day trading on Wednesday, October 28.

Also, the naira depreciated against the dollar, closing at N465/$1 at the parallel market on Wednesday, October 28, 2020, as businesses open up after relaxation of the curfew initially imposed to curtail the widespread violence that followed the hijacked #EndSARS protests.

This is also as businesses 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.

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 Wednesday. This represents a N2 drop when compared to the N463/$1 that it exchanged for on Tuesday, October 27.

·         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 appreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N385.67/$1.

·         This represents a 33 kobo gain when compared to the N386/$1 that it exchanged for on Tuesday, October 27.

·         The opening indicative rate was N385.89 to a dollar on Wednesday. This represents a 97 kobo drop when compared to the N384.92 that was recorded on Tuesday.

·         The N393.42 to a dollar is the highest rate during intraday trading before it closed at N385.67 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 declined by 47.5% on Wednesday, October 28, 2020.

·         According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $138.60 million on Tuesday, October 27, 2020, to $73.01 million on Wednesday, October 28, 2020.

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

·         The drop in dollar supply after the previous trading day’s huge increase 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 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

Pound-Dollar Rate Slumps Amidst Deteriorating Investor Sentiment and More Losses Possible say Analysts

The Pound-Dollar exchange rate is nursing a weekly loss of 0.78% having fallen below the 1.30 level to trade at 1.2935 ahead of the weekend, a move that is almost exclusively attributed to a broad rally in the U.S. Dollar.

The Dollar has risen against the majority of the world's major and minor currencies this week and is being tipped by analysts to remain supported in the short-term given a host of worries for investors that include European economic lockdowns, a looming U.S. election and the market's negative reaction to earnings from major U.S. technology companies.

The Dollar, Yen and Swiss franc are considered safe haven assets that find support when stock markets and other 'risk on' assets are falling, as is the case at the turn of the month. The world's major stock indices have registered sizeable losses over the course of the past five days and sentiment is expected by analysts to remain subdued given the potential for political uncertainty following next week's U.S. vote and the rising covid-19 case load.

This week has seen Germany and France announce major restrictions to counter the rising covid-19 case load that is hitting Europe, decisions that are likely to have a material negative impact on growth.

Reid notes that Sweden, whose actions have been among the most scrutinised, has announced that residents in Stockholm are to avoid shops, gyms and any other indoor venues that don’t provide essential services. This comes as the country has seen around 3,000 new cases, a record daily rise.

But it is not just Europe where covid-19 concerns are centred.

Political anxieties will likely remain elevated as the U.S. enters election week, with investors seemingly unwilling to shake off the fear that positive polling for Biden is off the mark and that a messy, contested outcome is possible.

Foreign exchange analysts have been of a view that a contested result would likely weigh on investor sentiment, reinforcing the conditions favourable to a stronger U.S. Dollar.

Under such an outcome the GBP/USD and EUR/USD exchange rate pairs could be set to establish fresh multi-week lows. (For the median, mean, high and low GBP/USD and EUR/USD forecasts from the world's leading investment banks, please see the latest report from our partners Global Reach. You can also view the targets set at bank such as Citi, Barclays, Lloyds, JP Morgan and Morgan Stanley).

Market participants will remain cautious on the outcome given a persistent refusal to fully believe what the polls and models are implying (a strong Biden win and Democrat win of the Senate), and even those who are inclined to watch polls will have noted that 'poll of polls' collations do show Trump's performance to have improved of late.

RealClearPolitics conduct one such 'poll of polls' and a tightening is evident:

Is the tightening enough to mean a margin of error becomes relevant? This question is all that is needed to keep markets on edge.

CBA strategists say one scenario that could lead to market volatility is where exit polls are skewed towards a Trump victory, because they judge more republicans will vote in person, but Biden wins once postal votes are considered.

Adding to the reasons to be cautious and buy Dollars ahead of the weekend was a decline in U.S. technology stocks overnight. Two leviathans of the global equity market - Apple and Amazon - declined in after-hours trade following the release of third quarter results which were all came in better than expected but crucially hinted at difficult conditions ahead.

Apple beat estimates with record sales of Macs and services but reported iPhone revenues fell -21% with revenue in Greater China fell by 29% to the lowest level since 2014.

Amazon was down after it reported revenue and earnings both solidly beat analyst estimates but warned covid-related expenses will go up to $4 billion.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Copper dips, focus on U.S. election

(Reuters) - Copper prices slipped on Friday as disappointment that China's five-year economic plan did not specify plans to stockpile the metal dominated the mood, while expectations that Democrat Joe Biden would win the U.S. presidential election capped losses.

Benchmark copper on the London Metal Exchange (LME) traded down 0.3% at $6,706 a tonne in official rings. Prices of the metal used widely in the power and construction industries are down nearly 5% since hitting a 28-month high last week.

DEMAND: China accounts for about half of global consumption of industrial metals. It is targeting sustained and healthy economic development in the five years from 2021, with an emphasis on a higher quality of growth.

ELECTION: Opinion polls show Biden with a significant edge nationally over U.S. President Donald Trump. Analysts expect U.S.-China tensions to ease if Biden wins.

ALUMINIUM: Worries about supplies on the LME market have pushed the discount for cash aluminium over the three-month <CMAL0-3> contract to $2 a tonne, the lowest since December last year, from levels near $40 a tonne in September.

Behind this concern is a large holding of aluminium warrants <0#LME-WHL> and a 30-39% long futures position for November settlement.

OTHER METALS: Three-month aluminium was up 1.1% at $1,823.5 a tonne, zinc rose 0.2% at $2,536.5, lead fell 2% to $1,804, tin lost 1% to $17,640 and nickel was down 1.6% at $15,289.

Gold prices today move higher after 2 days of decline, silver rates go up

Gold prices edged higher in Indian markets after two days of decline. Tracking gold, silver also edged higher. On MCX, December gold futures were up 0.28% to ₹50,425 per 10 gram while silver futures rose 0.7% to ₹60,577 per kg. In the previous session, gold had dipped 0.45% while silver had settled flat. In global markets, gold prices edged higher amid some weakness in US dollar. But the gains remained capped amid uncertainty over US stimulus package.

Spot gold prices was 0.2% higher at $1,870.9 an ounce. The dollar index was down 0.14% after hitting a one-month peak on Thursday. Uncertainty remains high before the US November 3 vote, lifting the dollar’s appeal as a haven asset over bullion.

President Donald Trump's chief economic adviser said on Thursday that any deal on coronavirus relief legislation would have to wait for now. The European Central Bank has committed to take new action in December to contain the growing fallout from a second wave of coronavirus infections.

Since hitting a record around ₹56,200 per 10 gram in August, gold’s rally has faltered. Still, holdings in exchange-traded funds or gold ETFs remain close to an all-time high.

According to World Gold Council, the September quarter saw continued inflows into gold-backed ETFs, although at a slower pace than in the first half. Investors globally added 272.5 tonnes to their holdings of these products, taking year to date flows to a record 1,003.3 tonnes.

The World Gold Council also noted that though jewellery demand improved from the June quarter record low, "the combination of continued social restrictions, economic slowdown and a strong gold price proved onerous for many jewellery buyers."

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

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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