Bulls n Bears Daily Market Commentary : 16 August 2021

Tue Aug 17 07:19:24 CAT 2021

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Bulls n Bears Daily Market Commentary : 16 August 2021

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ZSE commentary

The ZSE slid into the negative although the losses were marginal at the back of a significant improvement in turnover. Total turnover was up by 227% to ZW$650.6 million. Activity levels were slightly higher than Friday at 406 trades. Econet was the most active stock at 40 trades followed by Delta and OK Zimbabwe at 33 and 31 trades respectively. Masimba anchored both volume and value aggregate trading 10 470 000 shares a value of ZW$439.4 million contributing 67.5% to total turnover.

At close, the benchmark All Share Index shaded 0.19% with 17 advancers and 19 losers while 6 counters remained unchanged. The Top 10 Index was down by 0.75% with major losses in CBZ and Simbisa. The Top 15 Index pared 0.62%. The Medium Cap Index traded higher to 18 496.62 points appreciating by 0.63% whilst the Small Cap Index shaded 0.71% to close at 234 390.19 points. Leading the risers pack of the day was ZB Financial Holdings up by 15.00% followed by the construction company Masimba and First Capital Bank which added 4.87% and 4.11% respectively. The hotelier African Sun was up 3.30% to 799.54c. Leading in the shakers’ pack were Star Africa and AfDis which shaded 6.75% and 6.22% respectively. CBZ Holdings lost 4.43% to 8987.58c. FBC Holdings and Lafarge pared 3.05% and 2.87% respectively. The Old Mutual Top Ten ETF closed at 248.75c down by 0.53% after 14 758 units with a value of ZW$36 710 in 17 trades exchanged hands. On the VFEX, Padenga traded 5 988 shares worth US$1 077.84, thus shading 0.55% to close at US 18 cents..-wealthaccess

Global Currencies & Equity Markets

South Africa

Rand strengthens on dollar weakness

THE rand strengthened as US consumer sentiment data dented the dollar while, on home soil, the new finance minister indicated that South Africa would stay the course of consolidation, according to NKC Research.

The newly appointed minister of finance, Enoch Godongwana, said the ministry would stick to the fiscal framework, alleviating some concerns that the consolidation-focus might be shifted towards a greater growth-focus at the cost of debt metrics.

At the close of local trade, the rand quoted 0.4 percent stronger, at R14.74/$, after trading in range of R14.73/$ to R14.88/$. The rand traded sideways overnight. The expected range of the rand against the dollar today is from R14.60/$ to R14.80/$.

South African bourse

The JSE All Share (-0.02 percent) ended lower on Friday, with technology (-1.1 percent), industrials (-0.3 percent) and telecommunications (-0.5 percent) closing in the red at the end of last week. In the overall emerging market sphere, the MSCI Emerging Market Index (-0.8 percent) traded lower.

Zambia

Zambia markets surge as Hichilema win boosts debt-resolution hopes

(Reuters) - Zambia’s sovereign dollar bonds and currency rallied on Monday as investors were optimistic opposition leader Hakainde Hichilema would bring a swift resolution to the country’s debt woes after a landslide election win.

Hichilema, a businessman, is viewed as more market-friendly than 64-year-old incumbent Edgar Lungu after showing a desire to put Zambia on a more sustainable fiscal footing and engage with investors.

The 2024 and 2027 bonds added more than 8 cents in the dollar to trade at 76.1 cents and 75.1 cents respectively, their highest level since 2019, Tradeweb data showed.

The currency also enjoyed healthy gains, with the kwacha strengthening as much as 1.7%, close to the 11-month peak hit in July. It was last at trade at 19.17 to the dollar,

Creditors have been closely watching the outcome of last Thursday’s vote to gauge the trajectory of debt talks after the major copper producer, which owes more than $12 billion to external creditors, became Africa’s first pandemic-era sovereign default in November.

Setting the stage for an IMF lending programme to support its recovery, Zambia said in May it had reached a broad agreement with the IMF on macroeconomic and fiscal targets and policy issues.

With Hichilema’s United Party for National Development (UPND) likely to want to renegotiate a more comprehensive IMF deal, a staff-level agreement would probably happen in the first half of 2022 at the earliest, JPMorgan said in a note on Monday. It also recommended buying Zambia’s local currency February 2027 sovereign bond.

Markets will also be watching for how 59-year-old Hichilema engages with China, Zambia’s largest bilateral creditor and one of its largest trading partners.

Zambia owes around $3 billion to Chinese entities and uncertainty surrounds how much breathing room Beijing will offer, given it regularly offers debt reprofiling to troubled borrowers.

.

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Global Markets

U.S. dollar, yen rise after soft China data, amid Afghan unrest

(Reuters) - The dollar rose on Monday against commodity currencies such as the Australian, New Zealand and Canadian dollars, while the safe-haven yen gained as disappointing economic data from China, political tension in Afghanistan, and the spreading Delta variant of the coronavirus weighed on risk appetite.

The dollar's gains came after a slump in consumer sentiment on Friday weakened the U.S. unit.

Against a basket of six major currencies , the dollar was up 0.1% at 92.620, after falling to a one-week low of 92.468 on Friday. Its gains were most pronounced against commodity currencies.

The Aussie dollar was down 0.6% against the U.S. dollar at US$0.7335 , while the New Zealand dollar fell 0.4% to US$0.7016 ahead of a Reserve Bank of New Zealand policy meeting on Wednesday, at which economists widely expect the first hike in the benchmark interest rate since 2014. read more

The greenback, meanwhile, rose 0.4% against the Canadian dollar to C$1.2572 , amid Canadian Prime Minister Justin Trudeau's early election call for Sept. 20, betting that high vaccination rates against the coronavirus and a post-pandemic economic rebound will help him prolong and strengthen his grip on power.

Thousands of civilians desperate to flee Afghanistan thronged Kabul airport on Monday after the Taliban seized the capital over the weekend, prompting the United States to suspend evacuations as it came under mounting criticism at home over its pullout. read more

Currencies overall stuck to broad trading ranges as investors were wary of taking large bets at the start of a busy week for central banks.

China's July retail sales, industrial production and fixed asset investment were all weaker than expected as the latest COVID-19 outbreak weighed on the world's second-biggest economy. read more

Long positions on the greenback swelled to their biggest levels since March 2020, suggesting the dollar's recent move lower was more a temporary setback than the beginning of a structural downtrend.

The release of the Fed minutes this week will be key to the short-term outlook for the greenback, especially if it confirms more policymakers are leaning toward tapering its bond purchase plan by the end of the year.

Currency market volatility (.DBCVIX), even by its already low levels, is nearing 2021 lows thanks to the summer lull.

Elsewhere, minutes from the Reserve Bank of Australia's latest meeting are due on Tuesday.

In cryptocurrencies, bitcoin fell 1.2% to $46,479 after hitting a three-month high of $48,190 over the weekend.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold Price Forecast: XAU/USD faces hurdle near $1,790 as USD remains strong

Gold has moved into a critical area of resistance head of key US data events. The US dollar has collected a safe-haven bid and is on track to extend its recovery. Update: After locking handsome gains in the US session, gold prices retrace from the highs of $1,790. It is expected to hovers in a trading band of $1780 and $1790 amid mixed play of risk aversion and a stronger dollar. The downside of the prices are capped as support emerges from its safe-haven appeal on the rising Delta variant cases. The concerns on global growth recovery offset pressure from the stronger greenback. The US dollar stays elevated near 93.00, as it is also often seen as the safe-currency in the time of turmoil and uncertainty. Fed’s official hawkish comments also aided support to the USD. A higher USD valuation makes the precious metal expansive to other currency holders. A fall in the US 10-year benchmark Treasury yields turns investors attention toward gold, however, gains were limited on lack of physical demand in China and India.

While in bullish territory, the price of gold is flat in Tokyo and steady at around $1,787 in a narrow consolidative range ahead of key data from the US today.

The yellow metal moved higher on safe-haven accumulation and in a continuation of the firm correction of the heavy sell-off from the $1,800s.

First of all, the disappointing Chinese economic data (July Retail Sales and Industrial Production) was weighing on risk sentiment in Asia on Monday.

Then, there was anxiety over developments in Afghanistan and coupled with ongoing concerns over the impacts of the Delta variant made for a risk-off start to the week that supported gold.

However,  against a basket of six major currencies DXY, the dollar was up 0.1% at 92.630 by the North American close after falling to a one-week low of 92.468 on Friday. 

The US dollar could be a major headwind for gold prices in the weeks ahead as investors concentrate on the Federal Reserve’s timings for tapering depending on economic data.

The Retail Sales and FOMC minutes this week will be the first chapters in this sense and could be supportive of the greenback.

Hawkish Fed comments are also likely to reassert themselves in the market this week. 

Gold & DXY technical analysis

In a prior analysis, US dollar teases reversal traders, Golden Cross underpins, it was anticipated that there would be some let-up in the greenback's strength ahead of the Jackson Hole: 

However, the deterioration was fast on the back of bad data on Friday:

In the prior analysis, it was stated that there would be a bias to the upside while above 92.351 which will be a headwind for the gold price going forward.

Copper price falls on muted China retail and industrial data

Copper prices declined on Monday after data showed factory output and retail sales in China rose more slowly than expected in July.

Retail sales were hit by tough new virus restrictions introduced at the end of the month to contain fresh outbreaks.

China’s refined copper imports fell for the fourth straight month in July, adding to the sense of lost momentum.

Copper for delivery in September fell 1.5% from Friday’s settlement price, touching $4.326 per pound ($9,517 per tonne) on the Comex market in New York.

Flooding in central China and weak auto sales due to a chip shortage hurt manufacturing, while a slowing property market and environmental policies reduced output of steel and cement, hitting commodity demand.

Retail sales rose 8.5% year-on-year versus the median estimate of 10.9%.

Industrial production increased 6.4% year-on-year versus the median estimate of 7.9%.

Fu Linghui, a spokesman for the National Bureau of Statistics said China will maintain a “stable recovery” in the second half of the year, with the main indicators staying “within a reasonable range.”

Goldman Sachs suggests that while Chinese demand has got copper to where it is, struggling supply will provide the next lift in price.

According to the bank, the tension between macro negativity and micro positivity is “particularly acute for copper,” given a structurally challenged supply chain.

Strikes began last week at the Caserones and Andina mines in Chile while Teck suspended Highland Valley operations in Canada due to wildfire risk.-Reuters and Bloomberg

INVESTORS DIARY 2021

Company

Event

Venue

Date & Time

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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