Bulls n Bears Daily Market Commentary : 09 September 2020

Wed Sep 9 15:46:05 CAT 2020

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Bulls n Bears Daily Market Commentary : 09 September 2020

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ZSE commentary

Market Turnover ZWL$81,230,454.00 with foreign buys at ZWL$1,148,895.00 and foreign sales were ZWL $28,320,020.00 Total trades were 374.

The ZSE All Share Index closed higher at 1,626.60 points after adding 36.53 points . CBZ HOLDINGS increased by $4.5182 to close at $40.1947, SEED CO  was up by $1.5382 to end at $20.9057 while DAIRIBORD HOLDINGS settled at $1.2500 after adding $7.6000. SIMBISA BRANDS was up by $0.8809 to end at $6.7037 and TSL LIMITED  traded $0.8446 higher at $5.0675.

Trading in negative; DELTA CORPORATION dropped by $1.2143 to settle at $24.3065, BRITISH AMERICAN TOBACCO fell by $0.1840 to close at $198.8929 while RAINBOW TOURISM GROUP traded $0.1000 lower at $2.3000. AFDIS DISTILLERS lost $0.0458 to end at $19.9542 and OK ZIMBABWE eased $0.0330 to $4.9108.

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Global Currencies & Equity Markets

Nigeria

Naira falls at black market despite CBN’s sales of over $50 million to BDCs

At the black market where forex is traded unofficially, the Naira depreciated against the dollar.

The naira depreciated to N445/$1 at the parallel market, despite the resumed sales of over $50 million to over 5,000 BDC operators. In sharp contrast, Nigeria’s exchange rate at the NAFEX window appreciated to N386 during intraday trading on Monday, September 7, 2020.

Market Watch

NAFEX: The Naira appreciated marginally against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N386/$1.

This represents a 13 kobo gain when compared with the N386.13 to a dollar that it exchanged on Friday, September 4.

The opening indicative rate was N386.19 to a dollar on Monday. This represents a 50 kobo drop when compared to the N386.69 to a dollar that was recorded on Friday.

The N394.63 to a dollar is the highest rate during intraday trading before closing at N386. It also sold for as low as N384/$1 during intraday trading.

READ: Nigeria’s forex devaluation timeline – 2020

Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window declined further by about 49.3% on Monday, September 7, 2020. This is in contrast to the improved turnover that was recorded last week.

According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $89.15 million on Friday, September 4, 2020, to $45.22 million on Monday, September 7, 2020.

The Central Bank of Nigeria (CBN) is still battling to clear the huge backlog of foreign exchange demand especially by foreign investors wishing to repatriate back their funds.

Despite the improved forex turnover that was recorded last week, this decline 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 $58.52 million which represents a significant improvement from the $23.19 million that was recorded the previous week. The day’s FX turnover is still a far cry from the $200 million mark that was recorded some 2 weeks ago.

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 disparity between the official NAFEX rate and the black-market rate has continued to reduce significantly these past few days dropping to N53.87.

Parallel Market: At the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N445/$1 on Friday, according to information from Abokifx, a prominent FX tracking website. This represents a N5 drop when compared to the rate that it exchanged on Friday, September 4. This in contrast to the huge gains that were recorded last week.

Currency Developments

The central bank moved towards exchange rate unification last month after it devalued the official rate to N380/$1.

The local currency had strengthened by about 7.8% within the last one week at the black market as the Central Bank of Nigeria introduces 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 resumption of sales of forex to BDCs on Monday, September 7, 2020, will inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.

However, the BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders as it was inadequate to meet their expenses.

There has been a sharp drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.

South Africa

S.African rand falls ahead of GDP data; Turkish lira hits new lows

(Reuters) - South Africa’s rand fell on Tuesday with investors bracing for dismal GDP data due later in the day, while most other emerging market currencies made muted

move against a stronger dollar, with Turkey’s lira hitting new lows.

Stocks in the developing world were back in positive territory for the first time in a week, with the MSCI index gaining 0.3% as market participants waited to see if Wall Street can continue a tech rally after an extended weekend.

But anti-Chinese rhetoric from U.S. President Donald Trump, who again mooted the prospect of de-coupling the U.S. and Chinese economies, kept fears of an escalation in

tensions between Washington and Beijing alive.

The dollar gained amid the uncertainty, pressuring riskier currencies.

South Africa’s rand erased early gains to trade down 0.3%, with data at 0930 GMT expected to show the recession-hit economy contracted at its worst pace ever - 44.5% on an annualised basis - in the second quarter.

South African stocks were up 0.4%, in line with most other emerging market peers.

Turkey’s lira fell 0.2% as tensions with Greece over energy resources in the eastern Mediterranean grew. Athens plans to acquire arms, boost its armed forces and revamp its defence industry, the government’s spokesman said on Monday.

Subdued oil prices kept Russia’s rouble flat, while in central and eastern Europe, currencies made minor moves against a weaker euro which eyed a European Central Bank meeting on Thursday.

Romania’s leu was flat, caught between data that showed the economy contracted 10.5% on the year in the second quarter, while separate data showed net average wages in the country rose in July on a year-on-year basis as well as from June.

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EMERGING MARKETS

Stocks extend losses on trade,

(Reuters) - Emerging market currencies weakened on Monday with eyes this week on GDP data from Russia and South Africa, while a strong open for western European bourses helped an index of developing market shares cut some losses after a weak handover from Asia.

A pull-back on Wall Street on Friday, mixed trade data from China, and fears of an escalation in U.S.-China tensions after news of potential U.S. sanctions against China’s biggest chipmaker SMIC, pushed MSCI’s index of EM shares to a fourth straight session of losses.

But the index partially recovered from a fall of 0.6% as stock indexes in Turkey, South Africa, Russia , Hungary and Poland, all rose between 0.2% and 0.1%, tracking a near 1% gain in Europe’s STOXX 600 .

Volumes remained thin due to an U.S. holiday.

Against a stronger dollar, South Africa’s rand was flat despite fresh data showing net foreign exchange reserves rose in August. The second-quarter gross domestic product data, due on Tuesday, is expected to show the already recession-hit economy likely suffered its deepestever contraction following a strict coronavirus lockdown.

A return of nationwide power cuts last week by state utility Eskom and signs of tension inside the ruling African National Congress have seen the rand lag its emerging market peers.

A fall in oil prices following price cuts by Saudi Arabia added to the pressure for petrolinked currencies, with Russia’s rouble softening 0.3%. GDP data due on Wednesday  expected to show Russia’s economy held its ground in the April-June quarter.

Turkey’s lira eased 0.2%, just shy of new lows. President Tayyip Erdogan told European Council President Charles Michel on Sunday that the EU’s stance towards the East

Mediterranean would be a test of its sincerity, calling on it to take an impartial stance in Turkey’s row with Greece.

In Belarus, data showed gold and foreign exchange reserves fell by $1.4 billion to $7.5 billion in August due to central bank efforts of propping up the rouble amid widespread protests in the country last month against the disputed election of leader Alexander Lukashenko.

Belarus bonds were mixed, while the currency traded flat to higher.

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Commodities Markets

Gold edges up on economic woes, firm dollar caps gains

(Reuters) - Gold firmed on Wednesday on lingering uncertainties stemming from the coronavirus pandemic, but gains were limited as the dollar too gained from safe-haven

inflows driven by worries about a delay in the development of a vaccine.

Spot gold was up 0.3% at $1,936.47 per ounce by 1302 GMT, shaking off initial declines.

U.S. gold futures were little changed at $1,942.50.

The dollar, also seen as a safe haven, was at a near one-month high against rivals, making gold expensive for holders of other currencies.

Gold’s fundamentals are “still rock solid”, and given the strength in the dollar, “gold should have been down much more”, said Afshin Nabavi, senior vice president at precious metals trader MKS SA.

Global trials of AstraZeneca’s experimental COVID-19 vaccine were paused due to an unexplained illness in a study participant, keeping sentiment fragile in wider markets after a tech-driven sell-off in Wall Street on Tuesday.

The news of the delay may be indirectly supportive for gold, as it could spell a prolonged economic slowdown and further expectations of fiscal stimulus, said Saxo Bank analyst Ole Hansen.

Investors now await the outcome of the European Central Bank’s policy meeting on Thursday.

The pandemic has forced major central banks to provide massive stimulus, helping gold gain about 28% so far this year since it is considered a hedge against potential currency debasement and inflation.

Elsewhere, platinum was up 1.3% at $912.88. On Tuesday, the World Platinum Investment Council changed its forecast for the market in 2020 from a surplus to a deficit.

Silver was little changed $26.71, while palladium was down 0.4% at $2,264.53

Copper dips as sizzling rally loses some of its heat

(Reuters) - Copper fell on Tuesday as U.S.-China tensions rose and the dollar strengthened, but prices remained near two-year highs as London Metal Exchange (LME) warehouse system stockpiles hit 15-year lows and speculators bet on a further rally.

Benchmark copper on the LME was down 1% at $6,723.50 a tonne at 1030 GMT.

The metal reached $6,830 on Sept. 1 -- up than 50% from a low in March -- as demand from top consumer China revived and speculative investors raised their punt on higher prices to the biggest since June 2018.

U.S.-CHINA: President Donald Trump on Monday again raised the idea of separating the U.S. and Chinese economies. Shares in Chinese chipmaker SMIC plunged after news of

potential U.S. sanctions against it.

MARKETS/DOLLAR: European share prices fell and the dollar strengthened, making dollarpriced metals more expensive for buyers with other currencies.

STOCKS: Copper inventories in LME-registered warehouses fell 1,000 tonnes to 76,550 tonnes, the lowest since December 2005, and a steep premium for cash copper over threemonth metal pointed to a tight market. MCUSTX-TOTAL Stocks in Comex-registered warehouses in the United States are also declining, but inventories in Shanghai Futures Exchange and Chinese bonded warehouses are up since June. 

CHINA: China’s new bank loans are expected to have risen in August as the central bank spurred liquidity. Copper’s rally has further to run if the link between Chinese demand and credit availability fully reasserts itself, analysts say.

GERMANY: Weak German export data for July pointed to a slow economic recovery.

OTHER METALS: LME aluminium was down 1% at $1,780 a tonne, zinc fell 2.2% to $2,453.50, nickel slipped 0.3% to $15,135, lead lost 1.1% to $1,949.50, and tin was down 0.4% at $18,250.

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

Invest Wisely!

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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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