Bulls n Bears Daily Market Commentary : 29 July 2021

Thu Jul 29 15:04:44 CAT 2021

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Bulls n Bears Daily Market Commentary : 29 July 2021

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ZSE commentary

The ZSE closed in the green for the seventh consecutive session of gains.
Total turnover declined by 44% to ZW$131.7 million from a trade of over 5.3
million shares. Activity levels were lower at 529 trades. Star Africa was
the most active stock at 61 trades followed by OK Zimbabwe at 58 and Medtech
at 42. Star Africa was the most liquid counter as it anchored volume traded
trading 702 200 shares and Delta anchored value traded with a value of
ZW$37.8 million. At close, the benchmark All Share Index added 0.67% with 15
advancers and 19 losers while 6 counters remained unchanged. The Top 10
Index was up by 1.63%. The Top 15 Index added 1.34%. The Medium Cap Index
traded lower to 17 778.17 points depreciating by 0.69% whilst the Small Cap
Index added 1.28% to close at 238 724.42 points. Leading the risers pack of
the day was Get Bucks Microfinance Bank up by 8.51% followed by Zimplow and
Cassava which added 8.38% and 5.71% respectively. OK Zimbabwe was up 4.06%.
Leading in the shakers' pack were First Mutual Properties and Edgars which
shaded 10.00% and 4.25% respectively. RTG shaded 3.77%. Art Corporation and
Truworths pared 3.46% and 3.14% respectively. The Old Mutual Top Ten ETF
closed at 200c up by 4.53% after 23 500 units with a value of ZW$47 000 in 6
trades exchanged hands.- WealthAccess

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets

South Africa

South Africa's rand weakens as markets wait for Fed, stocks gain

(Reuters) - South Africa's rand dippedon Wednesday, as the dollar rose ahead
of the outcome of a Federal Reserve meeting that could offer clues on the
U.S. central bank's policy tapering plans.

At 1550 GMT, the rand ZAR=was trading at 14.8275 against the dollar, around
0.4% weaker than its previous close.

The dollar .DXYhas enjoyed a month-long rally after a hawkish shift from the
Fed in June, and investors are waiting to see whether there are more
signalsthis month in the face of spiking U.S. inflation.

Hints of a faster end to extraordinary policy support could lift the dollar
furtherand pressure emerging market currencies like the rand.

On the Johannesburg bourse, stocks rose to an eight-week high after a
lacklustre last few days as technology investor Naspers NPNJn.Jand its
subsidiary Prosus PRX.AS bounced back from their two days of sharp drops.

Naspers, through Prosus, holds a 29% stake in Chinese tech giant Tencent
Holdings 0700.HK, and had been showing massive drops on the back of
Beijing's increased scrutiny and clamp-down on technology companies,
especially in the education sector.

Naspers and Prosus both were up around 7% on Wednesday.

The benchmark index .JALSH closed up 1.76% to end the day at 68,526 points
and the blue-chip index of top 40 companies .JTOPI ended up 1.9% at 62,369
points.

The rally was also boosted by mining companies, especially platinum group
metal miners whose strong profit numbers boosted the mining index .JRESI up
by 1.31%.

Bonds firmed, with the yield on the benchmark 2030 government bond down 1.5
basis points at 8.910%.

Zambia

Kwacha Gains Boost to Economy

THE appreciation of the Zambian Kwacha experienced currently if sustained
will help retain confidence in the local economy leading to an economic
boost.

Last week, we saw the local currency gain from around K22.50 against the
United States (US) Dollar to K19.30.

On July 26, this year, Bureau De Change quoted the Kwacha at K19.00/19.30
for buying and selling respectively.

Thus, the financial experts are bullish about the continued appreciation of
the local currency citing shifting economic fundamentals.

Government through the Ministry of Finance stated the continued stability,
and recent gain of the Kwacha to the greenback, largely reflects changes in
the supply of foreign exchange and broad improvements in market
expectations.

The developments are consistent with broad goals set out in the Economic
Recovery Programme (ERP), which was launched by President Edgar Lungu in
December 2020.

Ministry of Finance public relations officer, Chileshe Kandeta indicated
that the recent developments on the market showed improved foreign exchange
flows from the mining sector in view of the strong recovery in copper prices
and production.

Mr Kandeta pointed out that this led to a significant expansion in the trade
balance estimated at US$1.9 billion during the period January to May 2021
compared to US$576.8 million over the same period last year.

These factors are significant flows from non-resident investors seeking to
purchase government securities, evidenced by the oversubscription at 116 per
cent in the bond issuance held today.

It attributes the changes to scale up market support by the Bank of Zambia
(BoZ) in view of improved flows from the mining sector which is another
factor that has contributed to major shifts in the foreign exchange market.

Further, the Ministry notes a confidence boost in the market following the
announcement by the International Monetary Fund (IMF) to allocate

Special Drawing Rights (SDRs) to its members in August.

It is upbeat that the SDR allocation is expected to increase international
reserves by approximately US$1.3 billion in August.

In addition, the Central Bank continued with the gold purchase programme
through which about US$22 million has been added to the international
reserve position.

On the other hand, Centre for Trade Policy and Development (CTPD) senior
researcher- public finance Gabriel Pollen is satisfied both the Ministry of
Finance and the central bank has provided some measure of guidance in terms
of explanatory factors associated with the Kwacha appreciation.

Dr Pollen adds that Zambia's chronic dependence on copper exports for
foreign exchange earnings is as worrying today as it was more than half a
century ago.

Nevertheless, he observes that it appears that it is tinkering the supply
side of the foreign exchange market by BoZ's injection of greenback into the
market may explain the bulk of the gains enjoyed by the Kwacha over the past
few days.

Indeed, Dr Pollen said the measure put in place by BoZ to receive tax
receipts in dollars from the mining companies is work of fiction, but that
this means that the Central Bank will now shift its portfolio around, by
offloading dollars into the foreign exchange market and crediting the Zambia
Revenue Authority (ZRA) account at BoZ with Kwacha.

Dr Pollen further observed that further, bond issuance to non-residents,
although he has noted a boost in foreign exchange inflows and that for the
time being, that cannot be relied upon for long-term stability of the
exchange rate.

Dr Pollen noted the other factor being debt suspension initiatives being
rolled out as well as goodwill from international lenders resulting in
Zambia's public debt repayments not being remitted as scheduled.

In 2019, debt repayment costs were about $944.4 million, dropping to
US$639.68 million in 2020 on account of Covid-19 debt repayment relief
support.

He says the Central government's external debt stands at US$12.74 billion;
hence, resumption of normal debt repayment is likely to ramp up demand for
the dollar.

Financial analysts have also described as significant the recent gains made
by the Kwacha against other major convertible foreign currencies.

Mambo Hamaundu says Zambia should move away from becoming a country that
focuses heavily on imports.

He notes that while the appreciation of the kwacha is significant, the
country needs to export more to have a stable exchange rate.

Mr Hamaundu says it is fundamental to have an exchange rate that is
predictable and not volatile.

Zambia's economy needs to improve on its productivity which will in turn
change the country into not being highly dependent on imports.

The appreciation of the Kwacha against international currencies is a
positive development which cannot be downplayed.

And Blessings Kafwanka says the appreciation of the Kwacha could improve the
standard of living for Zambians.

Mr Kafwanka thinks the diversification of the economy has a long term
solution to the depreciation of the local currency.

He also calls on Zambia to focus its efforts on becoming a mass export based
country.

Southern Africa Cross Borders Traders Association (SACBTA) also says the
appreciation of the local currency will reduce foreign exchange related
losses if sustained.

SACBTA general secretary, Jacob Makambwe says the high cost of foreign
exchange rate has been contributing significantly to the cost of doing
business for cross border traders in the region.

He observes that Kwacha gain is always good for business hence for measures
to sustain the gain by producing export oriented goods services, hence
insulating the local currency against dipping back into precariousness.

Similarly, energy expert Johnston Chikwanda said the appreciation of the
Kwacha against major convertible currencies is a boost for the energy
sector.

Mr Chikwanda says this is because most of the goods and services used in the
industry were imported in foreign currency.

Mr Chikwanda commends the Government for remaining resilient in sustaining a
favourable retail petroleum pump price despite the depreciation of the
Kwacha and increase in oil prices on the international market in the last
one year.

He is positive the appreciation of the Kwacha will in addition create
liquidity for the foreign currency in the local economy.

As observed by many economic commentators, going forward there is a need to
effectively implement import substitution measures by upping the country's
production and manufacturing thereby augmenting superfluous gains from
copper.

With COVID-19 pandemic, lockdowns in countries where Zambia buys most of its
consumables will continue, further causing economic distortions that will
pursue the currency to slide back to a more serious volatility.-Times of
Zambia.

Nigeria

Naira sees biggest plunge ever after CBN forex ban

Naira fell significantly against the U.S. dollar at the parallel market on
Wednesday noon, a day after the Central Bank of Nigeria (CBN) said it would
no longer sell forex to Bureau De Change operators.

The local unit, which opened at today's trading session at N505 per $1, is
currently trading at N522 to a dollar at the parallel market segment, data
from abokiFX.com, a website that collates parallel rates in Lagos showed.

This implies a N17.00 or 3.40 per cent devaluation from N505.00, the rate it
closed at the previous session of the black market on Tuesday. It is the
currency's biggest fall ever.

The CBN governor, Godwin Emefiele, had announced Tuesday that it has stopped
the sales of forex to Bureau De Change operators.

He explained that the parallel market operations had become a conduit for
illicit forex flows and graft.

Mr Emefiele who stated this during a live TV broadcast while announcing that
the bank has retained its benchmark policy rate, emphasised that weekly
sales of foreign exchange by the CBN will henceforth go directly to
commercial banks, and that the CBN will also call off the processing of
applications for for BDC licences in the country.

He said the CBN would channel weekly allocations of dollar sales to
commercial banks in order for them to meet legitimate foreign exchange
demands, while urging bank operators to sell forex to every customer who
meet its requirements.

Analysts say the move is bound to push prices of goods and services higher
at a time inflation has reached a four-year high.

 <mailto:info at bulls.co.zw> 

Global Markets

Pound highest in over a month as dollar dips on dovish Fed

LONDON (Reuters) - The pound hit its highest in over a month against the
dollar on Thursday, extending gains driven by a fall in coronavirus cases in
Britain and as a dovish U.S. Federal Reserve weighed on the greenback.

The British currency has gained for five consecutive sessions, and on
Thursday was 1.4% higher against the dollar on the week. By 0754 GMT,
sterling was 0.3% higher on the day at $1.3843, having hit its highest since
June 24 against the dollar.

The dollar also fell after Fed Chair Jerome Powell's remark that rate
increases were "a ways away".

Against a broadly stronger euro, the pound gained 0.1% to 85.10 pence per
euro.

Although COVID-19 infection numbers in Britain rose again on Wednesday for
the first time in a week compared with the previous day, they were still
lower week on week and there was little reaction from the pound.

Speculators went net short on the pound for the first time since December
2020 in the week up to last Tuesday, CFTC data showed on Friday.

Sterling's performance has tracked global risk sentiment in recent weeks,
with the currency's performance in line with the direction of global stock
markets. On Tuesday, however, the pound surged higher in a seemingly
arbitrary move around the daily currency market fix, leaving traders
stumped.

Traders will look to the Bank of England next week, which appears set to
keep its stimulus running at full speed despite two policymakers breaking
ranks to suggest that its nearly 900 billion pound ($1.2 trillion) QE
programme might have to end early as inflation speeds up.

A think-tank said Britain's government should take on hundreds of billions
of pounds of hard-to-sell bonds held by the Bank of England to reduce the
risk of the BoE's independence being questioned when the time comes to raise
interest rates.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold extends gains to third day on Powell's dovish remarks

(Reuters) - Gold gained for a third straight session on Thursday after U.S.
Federal Reserve Chairman Jerome Powell struck a dovish tone, indicating much
remains to be done before policy tightening begins, and as a softer dollar
added support to the metal.

Spot gold rose 0.6% to $1,818.50 per ounce by 0703 GMT. U.S. gold futures
climbed 1% to $1,818.20.

The Federal Reserve has talked down the risks of a rate hike and tapering a
little bit, and that gives gold prospects to drift higher in the short term,
said Kyle Rhoda, an analyst at IG Market.

Powell said the U.S. job market still had "some ground to cover" before it
would be time to pull back support and that it was "ways away" from
considering interest rate hikes.

Lower interest rates reduce the opportunity cost of holding non-yielding
bullion.

Investors will now turn their attention to the U.S. weekly jobless claims
data due at 1230 GMT.

Powell's remarks sent the U.S. dollar index to a more than two-week low. A
weaker greenback makes gold cheaper for holders of other currencies.

U.S. Treasury yields also fell after the Fed gave no details on when it is
likely to reduce bond purchases.

Global demand for gold rose in the second quarter to its highest quarterly
level in a year as central banks and investors stepped up purchases, the
World Gold Council said in a quarterly report.

Among other precious metals, silver gained 1.6% at $25.33 per ounce,
platinum rose 1% to $1,075.29, and palladium was up 0.8% at $2,648.39.

London copper rises as weaker dollar lifts metal's appeal

(Reuters) - London copper prices advanced on Thursday, supported by a weaker
dollar that makes greenback-priced metals cheaper and more appealing to
holders of other currencies.

The dollar hovered around a two-week low, weighed down by the latest
insistence from Federal Reserve Chairman Jerome Powell that rate increases
aren't on the radar.

Three-month copper on the London Metal Exchange rose 0.6% to $9,746 a tonne
by 0246 GMT, while the most-traded September copper contract on the Shanghai
Futures Exchange fell 0.8% to 71,550 yuan ($11,044.73) a tonne, tracking
overnight losses in London.

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
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for guideline purposes only and sourced from third parties.

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