Bulls n Bears Daily Market Commentary : 08 April 2021

Thu Apr 8 14:15:44 CAT 2021

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Bulls n Bears Daily Market Commentary : 08 April 2021

 <https://www.cbz.co.zw/> 

ZSE commentary

A block trade in First Mutual Holdings ensured that the ZSE see improved liquidity but performance remained in the doldrums weighed on by the across the board weaknesses. First Mutual Holdings contributed nearly 92% of turnover at ZW$308.9 million after almost 9.93 million shares exchanged hands. Turnover improved to ZW$338.8 million from a trade of 22 598 673 shares which exchanged hands in 401 trades. Medtech was the most active stock at 26 trades followed by Padenga and Delta. First Mutual Holdings was the most liquid counter as it anchored both volume and value traded at 19 926 673 shares and ZW$308.9 million respectively.

The benchmark All Share Index was down by 1.86% and the Top 10 Index was down 1.92%. The Top 15 Index was the day’s worst performer shading 2.23% to 2 803.95. The Medium Cap Index traded lower at 10 217.35 depreciating by 1.87%, whilst the Small Cap Index shaded 0.77% to close at 47 043.19. Leading the risers pack of the day was the Star Africa and Truworths  with a 10.97% and 8.44% share appreciation respectively. NMB added 3.48% to 950.10c. Bindura  appreciated by 2.70%. RTG gained 1.44% to close at 195.12c after releasing its 2020-year financial results. Leading in the shakers pack was First Mutual Life  which pared 11.72% followed by the ZIMRE Holdings  shading 10.22%. ART Corporation and Turnall pared 5.98% and 5.97% respectively. Please find a summary of the market activity as shown below; The Old Mutual Top Ten ETF closed at 179.58c down 1.54% after 22 700 units with a value of ZW$40 764 in 19 trades exchanged hands. Seed Co International traded 251 shares to close 10.00% lower at 18c..-wealthaccess

 <https://www.firstmutual.co.zw/> 

Global Currencies & Equity Markets

South Africa

Rand firms in early trade as dollar slips

Rand traded at R14.51 against the dollar, 0.38% firmer than its previous close.

The rand was firmer against a soft dollar early on Thursday, as investors weighed the US Federal Reserve’s commitment to keep interest rates low for some time against likely higher inflation.

At 0610 GMT, the rand traded at R14.51 against the dollar, 0.38% firmer than its previous close.

The dollar traded near more than two-week troughs versus major peers on Thursday, tracking Treasury yields lower.

Fed officials are committed to supporting the economy until its recovery is more secure, minutes of the US central bank’s most recent policy meeting released on Wednesday showed.

Lower US interest rate expectations boost investors’ appetite for emerging markets assets such as the rand, which offer higher returns but carry more risk.

In fixed income, the yield on the benchmark government bond due in 2030 was down 0.5 basis point to 9.325% in early deals.

Nigeria

Naira falls to near one-month low

The naira fell to a near one-month low against the dollar on Wednesday, as foreign exchange supply declined significantly.

Data posted on the FMDQ Security Exchange where forex is officially traded showed that the naira closed at N411.00 at the trading session of the Nafex window.

The last time the currency touched N411 or below was on March 10 when it closed at N411.13.

Wednesday’s performance represents a 0.12 per cent devaluation from N410.50, the rate at which the naira closed on Tuesday.

The currency experienced an intraday high of N405.00 and a low of N438.00.

The amount of dollar at the market fell by 70.96 per cent, with only $11.85 million recorded as against the $40.80 million.

Meanwhile, the fall did not immediately impact the parallel market, as naira remained stable there.

According to data posted on abokiFX.com, a website that collates parallel market rates in Lagos, the naira again closed at N485.00, the same rate it exchanged hands with the greenback since April 1.

The spread between the unofficial market and the I&E window exchange rate stood at N74.00, which translates to a gap of 15.26 per cent.

 <mailto:info at bulls.co.zw> 

Global Markets

Yuan Erases Year’s Gains Against Dollar While PBOC Steps Aside

In March, the currency gave up all its 2021 gains and then some. There are signs a short-term retreat may be starting as the drivers that lifted the yuan last year -- a quicker economic rebound from the pandemic and investors seeking yields -- get eroded, dimming the currency’s appeal.

Investors flooded into Chinese bond markets in 2020, boosting yuan usage and furthering China’s ambitions to internationalize its currency. But, a spike in Treasury yields is now cutting into the yuan’s yield premium, while an FTSE Russell index inclusion will now take place over a much longer period, slowing inflows. Throw in tensions between Beijing and Washington, and all these are speed-bumps for a currency that jumped almost 7% against the dollar last year.

Selling pressure in yuan accelerates amid decline to lowest since December

Foreign investors boosted their holdings of Chinese bonds by more than 1 trillion yuan ($153 billion) last year to a record 3.3 trillion yuan, according to data from the central bank. The funds were driven by a yield spread that touched a record of around 2.5% in November, and a resilience that made China’s debts a haven.

So far, the current bout of weakness doesn’t seem to be worrying the People’s Bank of China. Two weeks ago, it vowed to increase currency flexibility, a sign that Beijing will allow the yuan to drop against the dollar. Another policy maker recently expanded the quota for outgoing investments.

The yuan’s decline in March, its biggest monthly drop in a year, has arrested a steady advance that saw it head toward 6.4 from a low of 7.18 against the dollar last May. The onshore currency fell 0.1% to 6.5503 as of 5:44 p.m. in Shanghai.

Yield Advantage

This year, a relentless climb in Treasury yields has narrowed the yield gap of Chinese government bonds by around 1 percentage point from the record high. That advantage looks set to erode further with some on Wall Street forecasting that U.S. yields will climb to 2%.

Foreign funds trimmed their holdings of Chinese government debt in March, the first time in two years, according to the latest data.

Adding to the strains is an extension of the inclusion period for Chinese bonds into FTSE Russell’s flagship index to three years rather than the 12 months envisioned.

China-U.S. yield spread has narrowed since record in November

There’s also evidence that Chinese corporates and individuals have become less willing to own the yuan. They cut buying for two months as of February, the first back-to-back reduction in more than two years. At the same time, onshore banks became more active dollar buyers via the swaps market.

To top it off, U.S.-China relations are back in the limelight. The first face-to-face meeting between officials of the Biden administration and their Chinese counterparts failed to reach agreement on the way ahead. Washington recently imposed sanctions over alleged human rights abuses in Xinjiang, spurring a backlash from Beijing.

When the trade war between China and the U.S. escalated in August 2019, the yuan quickly tanked to 7 per dollar, the first time in a decade.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold prices today fall, a day after surging to one-month high, silver rates drop

Gold prices in India had risen to one-month highs in the previous session amid a sharp fall in rupee's value against US dollar

Gold and silver prices today edged lower in Indian markets, after a sharp upmove in the previous session. On MCX, gold edged 0.1% lower to ₹46,320 after hitting a one-month high of ₹46,400 in the previous session. Silver futures dropped 0.34% to ₹66,405 per kg. In the previous session, gold rose 0.9% while silver jumped 1.1%, tracking a sharp fall in the rupee.

MCX gold faces resistance at RS 47,080 while has support at ₹44,600, says domestic brokerage Geojit.

The rupee on Wednesday recorded its biggest single-day fall in nearly two years after RBI announced plan to purchase ₹1 lakh crore-worth government bonds in the current quarter. India imports most of its gold requirement.

Gold rates have rebounded in India from one-year lows of ₹44,100, hit last week. A weaker US dollar and some softening in US bond yields have led to a mild recovery in global rates.

In global markets, gold rates were steady today, tracking movements in the dollar and bond yields. The precious metal was flat at $1,737.02 an ounce, after a 0.3% drop on Wednesday. The precious metal was supported by a weak US dollar, which traded near more than two-week lows versus major peers.

On the upside, gold has immediate resistance at $1760 but stiff support is placed at $1680, says Geojit.

ETFs outflows continued. The holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund or gold ETF, fell 0.35 tonnes to 1,028.69 tonnes on Wednesday from 1,029.04 tonnes on Tuesday.

Among other precious metals, silver fell 0.3% to $25.03 while platinum rose 0.1% to $1,226.16.

In global markets, gold is down more than 8% this year after seeing a strong rally last year. Rising US bond yields and optimism over the global recovery have dampened the safe-haven appeal of gold, which doesn’t earn interest. Gold has also been hit by waning investor interest. Holdings in gold ETTs have continued to decline.

Most Asian equity markets were higher today after the US Federal Reserve's latest meeting minutes indicated continued policy support. They also indicated any spikes in inflation -- which could be a driver for bullion -- are likely to be transitory. Meanwhile, gold traders will look for more clues from Fed Chair Jerome Powell, who is due to take part in a panel about the global economy later today. 

Silver to regain its momentum, Rs 70,000 per kilogram possible

In the international markets, $27 looks very much possible from a monthly perspective, writes Prathamesh Mallya.

Silver prices in the international markets have had a volatile ride in the first quarter of 2021 with a high of $30.03 per ounce and a low of $23.75 per ounce. On the MCX, silver futures traded at a high of Rs 74,426 per kg and a low of Rs 63,814 per kg.

Stimulus measures by the Biden government to lift the US economy by creating jobs, many more Americans getting vaccinated, rising US treasury yields in the US, a strong dollar and strong global equities are the push factors for the correction in silver prices so far in 2021.

Optimism in the US economy

The US added 1.6 million jobs in the first quarter of 2021, and the most jobs in seven months in March, making it the start of what could be the strongest economic performance in nearly four decades. On the contrary, the jobs deficit is still huge and more than four million Americans have been unemployed for over six months.

Q1 gross domestic product estimates are as high as an annualized rate of 10.0 per cent. Growth this year could top 7 per cent, which would be the fastest rate since 1984. The US economy contracted 3.5 per cent in 2020, its worst performance in 74 years. Moreover, the Federal Reserve has signaled it would maintain its ultra-easy monetary policy stance for a while to allow complete healing.

After a good performance in 2020, hedge funds are losing their bets on silver as can be seen in the following chart:

The net longs in silver stood at 21,236 contracts as of March 30, 2021 as against 48,680 December 21, 2020 . The correction in

silver prices in the first quarter led hedge funds to reduce their exposure in the grey metal.

The brighter side of the grey metal

Led by industrial use and physical investment, global silver demand is projected to rise to a six-year high of 1.025 billion ounces in 2021, according to an analysis by The Silver Institute, published on February 10, 2021. Physical investment, which covers silver bullion coin and bar purchases, is expected to achieve a six-year high of 257 million ounces (Moz) in 2021, as investors continue to add the metal to their investment holdings.

Already, in 2021, holdings in exchange-traded products reached a record level of 1.18 billion ounces on February 3. Industrial demand is projected to post a four-year high of 510 Moz in 2021, a 9 per cent increase over 2020 figures. Global silver jewelry demand is forecast to rebound to 174 Moz but remain below pre-COVID levels. Silver’s use in the automotive market should also rebound strongly in 2021, to just over 60 Moz, benefiting from the growing electrification of vehicles, according to The Silver Institute.

What’s in store for silver now?

Volatility in the metal is a good recipe for traders to take the benefit of price moves, and the momentum suggests that the Rs 70,000 per kg level looks like a good possibility on the MCX futures.

In the international markets, $27 looks very much possible from a monthly perspective. Increasing demand-side focus from the automotive sector, increasing Covid infections globally and the central banks' liquidity push are a clear mixture for silver prices to rise. We remain bullish on silver and 'buy on dips' has to be the clear strategy in the grey metal.

INVESTORS DIARY 2021

Company

Event

Venue

Date & Time

Independence Day

18/04/21

Public Holiday in lieu of Independence Day falling on a Sunday

19/04/21

Workers Day

01/05/21

FCB

AGM 

virtual

06/05/21 : 3pm

Africa Day

25/05/21

Counters trading under cautionary

ART

Seed co Int.

Dairibord

Starafrica

Medtech

Turnall

Seed co

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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