Bulls n Bears Daily Market Commentary : 12 May 2021

Wed May 12 17:04:51 CAT 2021

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Bulls n Bears Daily Market Commentary : 12 May 2021

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ZSE commentary

The ZSE closed today’s session in the positive as buying momentum is continued to be seen across the board but liquidity remains low. Heavyweight counters continue to dominate turnover closing in today’s session at ZW$92.9 million (17.84% higher) from a trade of over 3.4 million shares. Padenga was the most active stock at 50 trades followed by FBC Holdings and Simbisa Brands. The market breadth was positive after 27 stocks appreciated against 8 that depreciated in a total of 42 stocks which traded. OK Zimbabwe was the most liquid counter as it anchored volume traded at 832 800 shares and Hippo anchored value aggregate a value of ZW$23.2 million.

At close, the benchmark All Share Index gained 1.16% and the Top 10 Index was up by a marginal 0.26%. The Top 15 Index added 0.48%. The Medium Cap Index traded higher to 12 395.98 points appreciating by 2.61% whilst the Small Cap Index also added 2.11% to close at 47 007.22 points. Leading the risers pack of the day was only listed Microfinance bank Get Bucks up by 20.00% followed by ZBFH which added 17.50%. Star Africa added 15.61% to 69.40c. Proplastics  was 7.56% up to 2527.64c. ZIMRE Holdings added 6.70% to 214.59c. Leading in the shakers pack was Truworths which pared 2.60% followed by CBZ Holdings shading 2.25%. African Sun and the conglomerate Innscor  pared 1.72% and 0.57% respectively. Please find a summary of the market activity as shown below; The Old Mutual Top Ten ETF closed at 173.96c up 1.48% after 74 532 units with a value of ZW$129 654.68 in 8 trades exchanged hands.wealthaccess

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Global Currencies & Equity Markets

South Africa

South African Rand Eyes New Milestone Highs

The Rand was within arm’s reach of new milestone highs against the Dollar on Wednesday and levels that could be sustainably achieved over the coming weeks if ongoing developments in the U.S. bond markets lead to renewed interest from international investors in the comparatively higher yielding South African assets.

South Africa’s Rand was edging higher against almost all major developed and emerging market currencies on Wednesday having scored its fifth consecutive gain over a receding Dollar, in the prior session, which had furthered a strong run of gains that made the Rand an outperformer over multiple time frames.

The Rand has ceded ground to only the Brazilian Real in the major emerging market sphere this last week and gotten the better of all major developed world currencies.

Similar is true of the last month in which the Canadian Dollar was the only G10 currency to pip the Rand while in the emerging markets, the Indonesian Rupiah and Brazilian Real were all that could pull ahead of the South African currency.

For 2021 as a whole the Canadian Dollar has edged out the Rand by around 0.36%, but with no other developed or emerging world currency able to get ahead of a South African unit.

The Rand has outperformed even amid occasional bursts of strength in U.S. Dollar exchange rates and despite the odd rally in American government bond yields, with its resilience taking many parts of the market by surprise and prompting questions of how long it could continue for.

Rand gains and Dollar declines took USD/ZAR beneath 14.0 for the first time since late 2019 on Tuesday in price action that appeared to suggest the exchange rate could be on course for an important technical trendline that was flagged in mid-April as a medium term target by Andreae’s Commerzbank colleague Axel Rudolph.

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Contact with the level or any USD/ZAR decline into the nearby area might be likely to prompt some consolidation or even a corrective rebound, as is often the case after strong one-way directional moves in exchange rates.

But there’s no shortage of reasons for why the Rand might still be able to hold onto the rump of its recent progress.

Prominent among the reasons for ongoing Rand strength is an emerging trend to the downside for Dollar exchange rates and steadier, stabler conditions in the global bond markets, which could potentially incite renewed interest from overseas investors in comparatively higher yielding South African assets.

U.S. bond yields have spent much of the time since late March in decline, which has taken wind from the Dollar’s sails.

The further U.S. yields fall or more difficulty they have rising over the coming weeks; the more likely international investors would be to look toward the higher-yielding assets available in places like South Africa.

Turner and the ING team say that strength in the Rand will help to curb inflation pressures by reducing the cost of imports, thereby lessening or even eliminating any imperative for the South African Reserve Bank to raise interest rates this year.

That would put a supportive floor under South African government bond prices and may, when combined with the high yield offering of those bonds, be enough to entice international investors back into the South Africa’s government bond market in what would be a supportive turn of events for the currency.

Foreign investors had reduced their holdings of South African government bonds during the opening quarter of this year, a period in which the Dollar rose against many currencies including those in emerging markets, with price action coming alongside earlier increases in American bond yields.

Nigeria

Naira falls further at official market

The currency remained stable for two successive sessions at the parallel market.

The naira weakened against the U.S dollar at the I&E window of the foreign exchange market on Tuesday as foreign exchange supply rose significantly.

However, the local currency remained stable for two successive sessions at the parallel market.

According to data posted on the FMDQ Security Exchange window where forex is officially traded, the local currency (naira) closed at N411.25 at the trading session of the NAFEX window on Tuesday.

Tuesday’s performance represents N0.58 or 0.14 per cent decrease from N410.67, the rate it traded in the previous session on Monday.

This became effective as foreign exchange supply increased significantly. The forex turnover boosted by 201.5 per cent, with $98.33 million recorded as against the $32.61 million posted in the previous session on Monday.

The domestic currency hit an intraday high of N395.00 and a low of N420.23 before closing at N411.25 on Tuesday.

The last time the domestic currency hovered around N411.00 and below was on May 6 last week.

Meanwhile, the local unit remained unchanged against the U.S. dollar at the unofficial market on Tuesday, data posted on abokiFX.com, a website that collates parallel market rates in Lagos showed.

Data posted revealed that the naira closed at N483.00 again at the black market, the same rate it has been exchanging hands with the greenback currency since May 7.

By implication, the spread between the parallel market and the official market exchange rates is N71.75 which translates to a gap of 14.90 per cent.

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Global Markets

Rupee falls by 8 paise to close at 73.42 against US dollar

The rupee declined by 8 paise to close at 73.42 (provisional) against the US currency on Wednesday amid risk aversion in the global markets and surge in crude oil prices.

At the interbank forex market, the local unit opened lower at 73.51 against the greenback and traded in the range of 73.39 to 73.51 during the day.

The rupee finally ended at 73.42 against the American currency, registering a fall of 8 paise over its previous closing of 73.34.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.14 % to 90.26.

Further, the rupee slipped on concern that rising COVID-19 cases in India and lockdown restriction in some states may hurt economic recovery. Market participants remained cautious ahead of CPI data from the US, Mukadam added.

However, a sharp fall was prevented on weakness in dollar and expectation of improved macroeconomic data, he said.

Brent crude futures, the global oil benchmark, were trading 0.55 % up at USD 68.93 per barrel.

On the domestic equity market front, the BSE Sensex ended 471.01 points or 0.96 % lower at 48,690.80, while the broader NSE Nifty declined by 154.25 points or 1.04 % to 14,696.50.

Foreign institutional investors (FIIs) remained net sellers in the capital markets, as they pulled out ₹ 336.00 crore on Tuesday, as per provisional data.

Meanwhile, India saw a record 4,205 COVID-19 fatalities in a day taking the death toll to 2,54,197, while 3,48,421 new coronavirus infections were reported, according to the Union Health Ministry data updated on Wednesday.

Global Markets

Rupee falls by 8 paise to close at 73.42 against US dollar