Bulls n Bears Daily Market Commentary : 12 April 2021

Mon Apr 12 14:13:13 CAT 2021

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Bulls n Bears Daily Market Commentary : 12 April 2021

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

ZSE commentary

The ZSE closed today’s session in negative territory declining to a market cap of ZW$506.2. Turnover however improved by 101.21% to ZW$169.32 million from a trade of 8 588 400 shares which exchanged hands in 334 trades. Innscor was the most active stock at 37 trades followed by OK Zimbabwe and Star Africa. The market breadth was negative after 25 stock depreciated against only 9 that appreciated in a total of 37 stocks which traded. First Mutual Holdings was the most liquid counter as it anchored both volume and value traded at 6 221 100 shares and ZW$118.1 million respectively contributing 69.75% of total turnover.

The benchmark All Share Index was down by a marginal 0.55% and the Top 10 Index was down by a paltry 0.96%. The Top 15 Index shaded 0.38% to 2 780.23. The Medium Cap Index traded higher at 10 127.22 appreciating by 0.10%, whilst the Small Cap Index shaded 0.55% to close at 47 081.69. Leading the risers pack of the day was the First Mutual Holdings  and NMB with a 17.91% and 4.99% share appreciation respectively. Padenga Holdings added 2.02% to 2495.53c. The nickel giant Bindura  appreciated by 1.45%. Star Africa gained 1.15% to close at 52.93c. Leading in the shakers pack was General Beltings  which pared 8.61% followed by the Innscor Africa shading 7.11%. Africa Sun  and Dairibord pared 6.01% and 5.12% respectively. Please find a summary of the market activity as shown below; The Old Mutual Top Ten ETF closed at 177.11c down 0.66% after 14 200 units with a value of ZW$25 150 in 10 trades exchanged hands.-wealthaccess

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

Global Currencies & Equity Markets

African currencies week ahead: Zambian unit seen on back foot, Uganda’s firm

LUSAKA: Zambia’s currency is likely to continue weakening against the US dollar next week while Uganda’s gains. Kenyan, Nigerian and Tanzanian currencies are expected to hold steady.

ZAMBIA — The kwacha may come under renewed pressure against the dollar next week due to increasing demand for hard currency as business activity heightens after the Easter holidays.

On Thursday, commercial banks quoted the currency of Africa’s second largest copper producer at 22.1100 per dollar, marginally down from 22.0750 at the close last Thursday. Zambia’s central bank last week injected $12 million into the economy, thus slowing the kwacha’s depreciation, Zambia National Commercial Bank (ZANACO) said in a weekly note.

UGANDA — The Ugandan shilling is seen trading with a firming tone on the back of conversions by offshore investors exiting Ugandan assets and weak importer demand.

At 1005 GMT commercial banks quoted the shilling at 3,645/3,655, compared to last Thursday’s close of 3,660/3,670.

KENYA — The Kenyan shilling is expected to take a pause in the week ahead after gaining ground rapidly in the previous two weeks.

At 1030 GMT on Thursday, commercial banks posted the shilling at 107.90/108.10 per dollar, having leapt from 109.20/40 the previous week. The surge in the currency has been driven by dollar inflows from investors abroad into the local government debt market, and positive sentiment following the approval of a new financing package by the International Monetary Fund.

NIGERIA — The naira is seen unchanged next week as the central bank maintains its grip on the currency and dollar scarcity blights the spot and black markets, traders said. The currency was quoted at 485 per dollar on the black market on Thursday, a level it has been stuck at since this month.

TANZANIA — Tanzania’s shilling is expected to hold steady next week and may gain more in the short to medium term as the new president pushes to improve the business environment. Commercial banks quoted the shilling at 2,314/2,324 on Thursday.

South Africa

Rand rally expected to continue on market optimism, say analysts

JOHANNESBURG - THE RAND is forecast to rally to its strongest this month if market optimism continues, after it reached a six-week high of R14.44 to the dollar on Thursday lifted by growing bets that lending rates in the US would remain low.

The local currency shook off the sluggish manufacturing and business confidence data.

Manufacturing output in South Africa fell more than expected in February, declining by 2.1 percent while business confidence plunged to a four-month low, from 94.3 in February to 94 in March.

However, analysts said this week that the rand had the potential to extend gains and push to the R14.40 to the dollar mark supported by progress on the vaccine front and optimism over global economic growth.

The rand has been the star performer in the emerging market currencies space this week as it capitalised on the weaker dollar before the Federal Reserve’s March policy meeting.

The minutes of the latest Fed meeting revealed nothing new, with the Federal Open Market Committee committing to continue providing monetary policy support to markets.

However, the rand ended the week on the back foot on Friday, trading around R14.60 to the greenback as the dollar recovered some ground and Treasury yields moved higher.

TreasuryONE’s currency strategist André Cilliers said the rand remained range-bound, at least for now.

Optimism about the pace of the global economic recovery gathered momentum in March as economists continued to upgrade forecasts for 2021 global economic growth.

The International Monetary Fund (IMF) has upgraded its 2021 global growth forecast to 6.0 percent from 5.5 percent while also raising its forecast for South Africa to 3.1 percent from 2.8 percent.

FXTM’s senior research analyst, Lukman Otunuga, said the past few months had been rough and rocky for emerging market currencies thanks to an appreciating dollar.

Otunuga said the rand remained the only emerging markets currency to appreciate against the dollar in 2021, currently up over 1 percent year-to-date as investor appetite was stimulated by US President Joe Biden's $2.25 trillion (R33trl) infrastructure plan.

He said a break below R14.50 to the dollar may open the doors towards R14.49 and R14.40, respectively, but a move towards R14.69 could be triggered should prices push back above R14.60. -BUSINESS REPORT

 <mailto:info at bulls.co.zw> 

Global Markets

Dollar threatens the emerging markets party

When French investment bank Natixis polled its clients in December about their key expectations for the year ahead, their survey found that 52 per cent of them expected emerging markets to outperform major economies.

The market consensus also held that currencies battered by the impact of coronavirus in 2020 would turn into star performers this year, their rise fuelled by the global economic rebound, a wilting dollar and loose monetary policy in the US.

It’s not shaping up that way. In the first quarter of the year, emerging markets equities rose around 5 per cent, less than half the 9 per cent surge in the S&P 500. The currencies of developing economies have also fared less well than anticipated, while the dollar has gained nearly 3 per cent against a basket of its peers in that period.

It hasn’t been great either. Nearly all EM currencies have weakened against the dollar since late February, with a slight recovery at the start of April. But the dollar is still 9 per cent stronger against the Brazilian real and it’s up 5 per cent against the Russian rouble since the start of the year. It’s also advanced against market darlings such as the Mexican peso and the Chinese renminbi.

Rising yields on US government bonds have been the main spoilers of the EM rebound story in the first quarter. As investors moved to price in a roaring comeback for the US economy, they have nudged yields on Treasuries sharply higher, increasing the attractiveness of US assets at a time when yields in emerging markets are near historic lows.

Before the pandemic, emerging markets interest rates were higher than those in major economies to compensate investors for taking more risks. Currencies in EM economies tend to be more volatile and vulnerable to sudden shocks than the dollar or the euro. But in 2020, central banks across the world moved in concert to slash rates to near zero, leaving little to tempt investors.

We continue to believe that global macro conditions . . . are setting the stage for a sustained outperformance of EM assets.

Wim Vandenhoeck, senior portfolio manager at Invesco Fixed Income

Now that rising inflation fears are forcing US yields higher as investors price in a less accommodative stance from the US Federal Reserve than before, this is becoming a problem for EM central bankers.

The key question is how they respond and how fast. Ed Al-Husseiny, a senior rates and currencies analyst at Columbia Threadneedle, says South Africa, Brazil and others will have to raise rates much faster than before to keep inflation in check and stop their currencies plummeting. But raising key rates too fast can kill off budding economic recoveries.

Brazil has already surprised investors with its biggest interest rate rise in a decade that pushed the key Selic rate to 2.75 per cent in March, with the central bank’s chief signalling another equally chunky rate rise at the next meeting.

Analysts at Capital Economics say central banks will choose to keep policy rates at near zero rather than risk derailing economic recoveries, even as yields on long-term US Treasuries rise. This will cause emerging markets currencies to lose ground against the dollar.

Domestic stories such as the firing of Turkey’s central bank governor and rising geopolitical tensions in Russia have also added to the burden on EM currencies.

But some investors remain optimistic, believing that US government bond yields will stabilise and the original playbook for 2021 can resume with a strong economic rebound and a weaker dollar buoying emerging markets assets.

State Street’s Hurd expects “a sustained [and] widespread” rally in currencies, with the Russian rouble being a favourite bet. The rouble has been the second worst performing currency this year because of heightened geopolitical risks, with the dollar rising nearly 5 per cent this year.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold prices slip as Treasury yields, dollar firm on upbeat U.S. data

Gold prices fell on Monday, weighed down by surging U.S. Treasury yields and a firmer dollar after better-than-expected U.S. economic data lifted prospects for higher inflation.

Spot gold fell 0.3% to $1,738.12 per ounce by 0350 GMT. U.S. gold futures were down 0.4% to $1,737.70 per ounce.

Producer prices in the United States rose more than anticipated in March, resulting in the highest annual rise in 9-1/2 years and signalling the start of higher inflation as the economy reopens amid strengthened public health and substantial government assistance.

Some investors view gold as a hedge against higher inflation, but higher Treasury yields dull some of the appeal of the non-yielding metal.

Federal Reserve Chair Jerome Powell said the U.S. economy is at an “inflection point,” with hopes that inflation and hiring will accelerate in the coming months, but there are dangers if a hasty reopening leads to a continuing uptick in coronavirus cases.

Asian shares fell as investors waited to see whether U.S. results will support sky-high valuations, while bond markets could be checked this week by what could be very good readings for U.S. inflation and retail sales.

The dollar index rose 0.1% against rival currencies, making gold expensive for buyers outside the United States.

Elsewhere, silver fell 0.4% to $25.13 and palladium was down 0.3% to $2,630.78. Platinum slipped 0.6% to $1,191.87.

Copper loses ground on fears of Chinese commodities price caps

(Reuters) - Copper prices slipped on Monday on worries that top metals consumer China wants to put a lid on surging commodity prices to head off potential inflation.

Concern about faltering demand and rising copper inventories also weighed on the market.

Benchmark copper on the London Metal Exchange (LME) was down 0.6% at $8,875 a tonne by 1055 GMT.

Copper has gained about 30% over the past five months, having touched a 9-1/2 year peak of $9,617 in late February.

Shanghai copper declined 1.8% to 65,690 yuan a tonne.

Chinese factory gate prices (PPI) in March rose at their fastest annual pace in nearly three years, data showed on Friday.

Chinese Premier Li Keqiang emphasised the need to strengthen market regulation of raw materials to ease the cost pressure of enterprises amid rising global commodities prices, China's official Xinhua news agency reported on Sunday. (bit.ly/2PV89K7)

Metals markets had welcomed U.S. President Joe Biden’s plan to spend $2.3 trillion to improve U.S. infrastructure, but Republicans have been wary.

* LME copper inventories MCUSTX-TOTAL touched their highest in five months on Monday, having more than doubled since the start of March.

* Also weighing on the market were indications of weak demand in China as the Yangshan copper premium SMM-CUYP-CN fell to $51 a tonne, its lowest since Nov. 20.

* Russia’s Nornickel said on Monday that it would fully restart operations this month - earlier than previously expected - at one of two major mines hit by flooding.

LME nickel slid 2.2% to $16,255 a tonne.

* LME aluminium added 0.2% to $2,267.50 a tonne, lead rose 0.2% to $1,981.50, zinc shed 1.3% to $2,793 and tin lost 0.4% to $25,650. ($1 = 6.5526 yuan)

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.

(c) 2021 Web: <http://www.bullszimbabwe.com>  www.bullszimbabwe.com Email:  <mailto:info at bulls.co.zw> info at bulls.co.zw Tel: +263 4 2927658 Cell: +263 77 344 1674

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