Bulls n Bears Daily Market Commentary : 22 September 2020

Tue Sep 22 16:26:51 CAT 2020

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Bulls n Bears Daily Market Commentary : 22 September 2020

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ZSE commentary

Bindura block highlights the session…

Nickel miner Bindura highlighted the market as circa 926m shares worth $3.43bn exchanged hands in the counter. Resultantly, trades in the nickel miner claimed 99.83% of total volumes traded and 99.79% of the value outturn. The volume aggregate ballooned 31,062% to 928.35m while, turnover jumped 16,678% to $3.44bn. Price movement was seen in twenty-one counters distributed into eight risers and thirteen fallers to establish a negative market breadth of five. The gainers’ pack was headlined by construction group Masimba that advanced 9.22% to $2.1844, followed by Riozim which gained 1.48% to $12.1000. Banking group First Capital extended 1.01% to $0.8695 while, brick manufacturer Willdale added 0.85% to $0.2500. Fast foods group Simbisa improved 0.19% to close at a vwap of $6.4289.

Ariston was the top casualty of the day after trimming 18.24% to settle at $1.4690. Trailing was apparel retailer Edgars which dropped 12.13% to end at $0.8787 while, retailer OKZIM shed 5.52% to $4.0052. Zimpapers let go 4.17% to $0.6900 while, Truworths capped the top five shakers of the day on a 4% decline to $0.1800. The mainstream All Share Index slipped 0.65% to 1,648.19pts while, the Industrial index lost 0.14% to 5,431.12pts. The blue chips index eased 0.63% to close at 1,096.93pts. RTG traded 1,900 shares at an unchanged price of $2.2900, post the release of its HY20 results in which a PAT of $49.30m in inflation adjusted terms was reported. Foreign sales stood at $3.43bn which represent 99.82% of turnover while, no purchases were recorded in the

session. -efesecurities

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

Global Currencies & Equity Markets

South Africa

South African Rand in Comeback Mode as Forecasts Tell of Further “Significant” Gains Ahead

The Rand was in comeback mode Tuesday having outperformed major developed and emerging market rivals but the South African currency has significant scope to advance further in the months ahead, according to upgraded forecasts from Goldman Sachs.

South Africa’s Rand rose against all major currencies as well as its ten largest emerging market rivals on Tuesday despite widespread gains in U.S. Dollar exchange rates, drawing a line under steep losses seen in the prior session when tightening restrictions on freedoms and activity in Europe helped further a vicious sell-off in global stock markets. 

The Rand suffered its steepest loss since June 11 in response to a worsening coronavirus situation in Europe, where new infections are rising at speeds approaching those seen at the height of the first wave, although the human cost has been substantially lower than that incurred earlier.

Monday’s losses added to Friday declines inspired by a wobbling Chinese Yuan, which had its feathers ruffled by White House efforts to push two Chinese social media firms out of the U.S. But the South African unit is not only likely to recover all of its more recent declines but also a larger portion of its 2020 loss by the time the year is out, according to Goldman Sachs forecasts. 

The Goldman team has warned that October’s medium -term budget update is a risk to the Rand because it’ll return the market’s focus to the deteriorating public finances, but the bank otherwise looks for the South African currency to continue reclaiming ground previously lost to the Dollar. 

The bank cites improving global economic data and signs of a robust recovery in China, which is South Africa’s largest trade partner, as well as a hiatus in the U.S.-China tariff fight that would be more sustainable in the event of an opposition victory in November’s U.S. presidential election. 

In addition, sharp falls in the number of new coronavirus infections detected domestically and a September move to reopen the borders offer scope for South Africa to earn additional foreign exchange through the tourism industry which is an lucrative GDP-enhancing export industry.

Goldman Sachs looks for USD/ZAR to hit 15.75 by year-end, an upgrade from 16.50, while the Pound-to-Rand rate is seen falling from 21.35 to 20.18. The bank sees the Rand pushing USD/ZAR to 15.25 by September 202, an upgrade from 16.25, but envisages a Pound-to-Rand recovery to 21.98, in part as a result of an anticipated resolution of the Brexit process.

Silberman says commodity prices and the Rand will both be beneficiaries of China’s infrastructure-driven recovery and that there's upside risk coming from South Africa's National Economic Development and Labour Council recovery plan if it produces a sustainable solution to Eskom’s debt problem. Eskom has been unable to keep the country’s lights on for years but with the economy on its knees and public purse more stretched than ever before as a result of the pandemic, the need for a solution has grown not least of all because generation capacity constraints impose a speed limit on the economy. 

The ailing power monopoly, along with October's budget and other developments relating to the fragile national financial position are all risks to the Rand. So too are U.S.-China relations if they deteriorate enough to threaten the global recovery, not to mention coronavirus flare-ups in developed and emerging markets. Tighter restrictions and localised shutdowns are already disrupting the recovery in Europe, where the UK is at risk of a second 'lockown.' 

Rand Merchant Bank forecasts USD/ZAR will end the year at 16.60, unchanged from Tuesday's level, but looks for GBP/ZAR to rise from 21.35 to 22.10.

Nigeria

Naira falls at black market as dollar scarcity hits the forex market

Nigeria’s exchange rate at the NAFEX window remained stable for the fifth consecutive trading day to still close at N386/$1 during intraday trading on Thursday, September 18.

Also, the naira depreciated closing at N465/$1 at the parallel market as BDC operators expect another round of forex allocation. The drop could be attributed to increased demand and dollar scarcity as forex traders appear to hoard the foreign exchange.

Parallel Market: At the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N465/$1 on Friday, according to information from Abokifx, a prominent FX tracking website. This represents a N3 drop when compared with the N462/$1 that it exchanged on Thursday, September 17.

Currency Developments

The local currency has strengthened by about 7.8% within the last one week at the black market, as the Central Bank of Nigeria 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 $150 million to BDCs since the 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 failed to sustain the initial gains made after the CBN announced plans to provide liquidity.

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

We also noted that forex traders monitored during the previous week appear to hoard forex as they anticipated further depreciation in the market.

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.

NAFEX: The Naira still remained stable against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N386/$1.

This was exactly the same rate that it exchanged for on Thursday, September 17.

The opening indicative rate was N386.37 to a dollar on Friday. This represents a 32 kobo drop when compared to the N386.05 to a dollar that was recorded on Thursday.

The N392.62 to a dollar is the highest rate during intraday trading before closing at the rate of N386/$1. It also sold for as low as N383/$1 during intraday trading.

According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $87.78 million on Thursday, September 17, 2020, to $83.35 million on Friday, September 18, 2020.

The slightly higher forex supplies at the NAFEX window CBN’s move to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.

The 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.

The average daily forex sale for last week was about $34.5 million which represents a drop from the $58.52 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.

 <mailto:info at bulls.co.zw> 

Global Markets

Europe breathes easier after second wave wipeouts

LONDON (Reuters) - Europe’s stock markets clawed back some ground on Tuesday, a day after rising second waves of the coronavirus epidemic caused the region’s biggest wipeout since June and drove investors back to government bonds.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, August 20, 2020. REUTERS/Staff/Files

Conditions were still choppy with South Korea and China pulling Asia down for a second day and tech-heavy Nasdaq now out of its recent stellar range, so it was a relief for traders to see Europe and U.S. futures stabilise.

The pan-European STOXX 600 index made back 0.5% of the 3.2% it lost on Monday, helped by respective 1% and 1.3% gains for the tech and car sectors that offset bumpier rides elsewhere.

Travel and leisure stocks saw 0.3% falls to add to Monday’s 5.2% plunge and S&P futures were also a touch weaker. As investors stayed close to safety, yields on Germany’s government bonds held near six-week lows and the dollar inched up.

Concerns had surfaced in the currency market, with both the euro and Britain’s pound falling as much as 0.3% against the dollar.

UK Prime Minister Boris Johnson told Britons on Tuesday to go back to working from home, along with new curbs on pubs, bars and restaurants that he said could be in place for as long as six months without some form of COVID vaccine.

This came as France saw its seven-day daily rolling case count rise above 10,000 for the first time over the weekend, Madrid had called in the army, Italy introduced more mandatory testing and Germany described the situation as “worrying”.

Beyond the impact of the virus, Hong Kong shares of HSBC and Standard Chartered had weakened a further 2%, after leaked reports showed they were among global lenders that have transferred more than $2 trillion in suspect funds over nearly two decades.

TECH TEST

Wall Street’s premarket gainers included Microsoft, Apple, Amazon and Alphabet, all of which have dominated the global market rebound from its coronavirus-driven crash in March.

Tesla skidded 3.4% though after Chief Executive Officer Elon Musk warned about the difficulties of speeding up production.

U.S. stocks have tumbled over the past three weeks as investors have pulled back from the tech surge while JPMorgan and Bank of New York Mellon fell 3.1% and 4.0% respectively on Monday too.

Concerns are also growing about a delay in U.S. stimulus measures as Congress remains deadlocked for weeks over the size and shape of another coronavirus-response bill, on top of the roughly $3 trillion already enacted into law.

The weekend death of U.S. Supreme Court Justice Ruth Bader Ginsburg appeared to make the passage of another package less likely before the Nov. 3 presidential election, sparking large declines in the healthcare sector.

Back in Europe, Italy’s borrowing costs fell to multi-month lows on Tuesday on a perceived reduction in political risk as right-wing opposition leader Matteo Salvini had failed to make the breakthroughs he had hoped for in regional elections.

The results of the Sept. 20-21 vote, released late on Monday, were a boost to the fragile coalition government which is battling with the economic slump sparked by the coronavirus.

In the commodity markets, gold fell against the firmer dollar to trade at $1,908.76 per ounce, while Brent oil gained 0.4% to $41.65 having lost $2 on Monday and U.S. crude rose 0.5% to $39.5 per barrel.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold falls as dollar jumps to six-week high

Gold fell on Tuesday as the dollar climbed to its highest in over a month, while investors remained doubtful over additional stimulus measures to aid the coronavirus-hit economy ahead of speeches from Federal Reserve officials this week.

Spot gold had fallen 0.45% to $1,904.00 per ounce, after dipping to $1,882.70 on Monday, its lowest level since Aug. 12. U.S. gold futures fell 0.1% to $1,909.10 per ounce.

The dollar , also considered as a safe-haven, notched a new six-week high against a basket of other major currencies as markets turned risk-averse over a surge of virus cases and new lockdown measures in Europe.

Supreme Court vacancy left by the death of Justice Ruth Bader Ginsburg left investors fretting over the chances of more fiscal stimulus before the election Focus now shifts to Federal Reserve Chair Jerome Powell’s testimony before lawmakers, addressing questions about the raft of emergency measures the central bank has taken to cushion the blow to the economy from the pandemic.

On the technical side, spot gold may retest support at $1,886 per ounce, a break below which could cause a fall to $1,855, said Reuters technical analyst Wang Tao.

Elsewhere, silver slipped 2.2% to $24.18 per ounce, platinum was up 0.9% at $889.01 and palladium fell 0.3% to $2,267.54.

Silver breaks down gold, platinum hold support

Kitco-Monday was quite the day for gold, silver and platinum. All three had broken down below support. What looked like a massacre turned out to be a silver breakdown with gold and platinum, holding support with a late-day rally.

Silver saw the biggest amount of damage on Monday, breaking down below support. Today it has opened significantly lower prices from here. This morning, silver is seeing a minor rally, but certainly not one big enough to reverse the breakdown. The silver price action now brings $22-$23 in play as the next significant level for silver to hold.

When gold started to sell off Monday and quickly accelerated, it appeared as if gold could be down over $100 an ounce. However, the major level of 1900 held after spending much time below. New support and resistance levels for gold are 1950 resistance 1875 support, based on December futures.

We remain short gold, silver, and platinum, looking for the downtrend to continue. For now, we do not see a reversal to the long side coming anytime soon. Expect selling to accelerate. However, remember that in significant downtrends. There are monster rallies that make you second guess your position. As long as our algorithm stays short, we will remain short.

We are now offering a comprehensive commodity report that complements our other services. The Technomental Commodity Report comes out on Wednesday evenings and provides comprehensive fundamental and technical coverage of most commodities that trade on the futures markets in the US and UK, as well as stocks, bonds, and digital currencies.  There is a summary report on Friday after the markets close, and robust quarterly reports on each of the six commodity sectors and a general overview that recaps the past three months and offers projections and suggestions for the next quarter. Andy Hecht, the author of the report, has been a commodity trader since the early 1980s and has vast experience in markets across all asset classes.

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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