Bulls n Bears Daily Market Commentary : 26 April 2022

Wed Apr 27 07:03:23 CAT 2022

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Bulls n Bears Daily Market Commentary : 26 April 2022

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ZSE commentary

The All-Share Index rallied 11.94% (3,074.06 points) to close at 28,816.65 points. NATIONAL FOODS LIMITED surged by $131.1875 to $2,191.1875, INNSCOR AFRICA

jumped $86.4331 to end at $596.3254 together with DELTA CORPORATION put on $67.7260 to $458.0401. ECONET WIRELESS advanced by $52.6933 to $329.0326 while TANGANDA TEA COMPNAY strengthened by $44.9374 to $341.0196.

Losses were recorded in UNIFREIGHT which lost $3.9423 to $30.0006, MASHONALAND HOLDINGS eased $0.5532 to $3.7523 along with ART CORPORATION which inched $0.4261 to $24.1739. TURNALL HOLDINGS and WILLDALE both trimmed $0.2931 and $0.1715 to close at $7.2000 and $3.8935 respectively.

EXCHANGE TRADED FUNDS (ETF)

DATVEST MODIFIED CONSUMER STAPLES ETF recovered by $0.0080 to end at $1.7135, OLD MUTUAL ZSE TOP 10 and MORGAN & CO MULTISECTOR ETF both rose by $0.5860 and $1.0648 to finish the session at $11.6003 and $19.7579 respectively.-zse

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Global Currencies & Equity Markets

South Africa

Rand stabilises after heavy drop, stocks recoverJSE gains, commodity stocks recover.

The South African rand stabilised against the dollar on Tuesday, finding its feet after a heavy fall last week when sentiment towards the risk-sensitive currency slumped.

At 20:44, the rand traded at 15.81 against the dollar, down a modest 0.75% on its Monday close.

The rand lost over 6% against the U.S. currency last week because of factors including severe power cuts by struggling state utility Eskom, deadly floods in an economically significant province and comments by the U.S. Federal Reserve which suggested an aggressive rate hike outlook.

Analysts had been warning that the South African currency, which some investors use as a proxy for commodities exposure, looked overvalued before its recent fall.

“The drastic and sharp weakening is unlikely to be sustained. The possibility that the U.S. Fed will disappoint at its next rate meeting in May would support the rand,” DG Capital Forex said in a research note, predicting a 15.00 to 15.75 rand-to-dollar range in the short term.

Stocks recovered from the previous day’s rout but Lukman Otunuga, Senior Research Analyst at FXTM, warned that investors were cautious as fears over the impact of China’s new lockdowns lingered in the air.

“Caution is likely to remain the name of the game this week with sentiment fragile as strict lockdowns in China, concerns around a global slowdown, Fed rate hike fears and geopolitical risks leave investors on edge,” Otunuga added.

Nigeria

Naira Gains at FX Market as Dogecoin Spikes 20.7% 

The Naira appreciated against the Dollar at the Investors and Exporters (I&E) segment of the Nigerian foreign exchange (forex) market on Monday by 0.25 per cent or N1.03 to settle at N417.30/$1 compared with the previous exchange rate of N418.33/$1.

Equally, the local currency appreciated against the Pound Sterling at the spot market by N6.04 to N530.54/£1 from N536.58/£1 and also gained N2.98 against the Euro to close at N447.30/€1 in contrast to the previously quoted rate of N450.28/€1.

However, the domestic currency depreciated against the greenback at the peer-to-peer (P2P) FX market segment by N1 or 0.17 per cent to N586/$1 from N585/$1.

At the cryptocurrency market, Business Post reports that it was mixed, though investors reacted to news of Mr Elon Musk finally achieving his desire to fully take over Twitter.

This pushed the price of Dogecoin (DOGE) higher by 20.7 per cent to sell at N96.63.

The meme coin is being promoted by Mr Musk and it is believed that with Twitter in his pocket, the digital currency will become very valuable in no time.

Twitter has a payment feature which accepts limited cryptocurrencies and with the takeover, this opens the possibility of a future integration for Dogecoin on the app when it enters private hands.

Also, Ethereum (ETH) made a 1.9 per cent gain to sell at N1,809,000, Bitcoin (BTC) grew by 1.5 per cent to trade at N24, 319,999, Cardano (ADA) appreciated by 0.9 per cent to trade at N541.14, while Binance Coin (BNB) gained 0.4 per cent to trade at N243,103.21.

On the flip side, Dash (DASH) lost 2.3 per cent to sell at N62,993.14, Ripple (XRP) fell by 1.5 per cent to trade at N416.39, Litecoin (LTC) went down by 0.7 per cent to settle at N62,993.14, Solana (SOL) lost 0.3 per cent to sell at N60,461.51 while the US Dollar Tether (USDT) declined by 0.1 per cent to quote at N597.45.

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Global Markets

Dollar nears pandemic peaks as investors seek safety

(Reuters) - The dollar stood at its highest level since the early days of the pandemic on Wednesday and was heading for its best month since 2015, supported by the prospect of U.S. rate hikes and on safe-haven flows fanned by slowing growth in China and Europe.

Fears for Europe's energy security pushed the euro to a five-year low of $1.0635 after Russia's Gazprom said it would cut gas supply to Poland and Bulgaria. read more

The U.S. dollar index , which measures the greenback against a basket of six major currencies, edged up to 102.39 in the Asia session, the strongest it has been since March 2020.

"The dollar is the hedge in markets presently, while commodities including gold are no longer working as effectively," said analysts at Citi.

"The dollar is 'quality carry,'" they added. "The dollar also offers more yield than any of the other safe haven FX alternatives."

The dollar index is up 4% this month and the euro, yuan and yen have slid as traders wager that rates are going up faster in the United States than any other major economy.

"Even if the Fed stops tightening in June 2022, the U.S. is expected to have higher rates than (Europe) through the whole of 2023," said Deutsche Bank strategist Alan Ruskin.

The heft of that as a driver of currency movements has only increased as uncertainty swirls around the war in Ukraine - now in its third month - as well as the global consequences of China's persistence with disruptive COVID-zero policies.

The Chinese yuan took a breather following a steep decline that appears to have had the blessing of authorities, steadying at 6.5575 per dollar.

Data also showed Chinese industrial profit growth quickened in March. read more

U.S. earnings are likely to set the tone across financial markets later in the day, ahead of U.S. growth data due on Thursday where a solid showing could reinforce bets on rates moving sharply higher at the Federal Reserve's May meeting.

Commodity currencies have also sold lately in favour of the safety of the greenback, driving the New Zealand dollar close to its lowest levels of this year at $0.6562.

The Australian dollar caught a modest boost after Australian consumer prices surged at their fastest annual pace in two decades, spurring speculation that interest rates could be lifted from record lows as soon as next week. read more

The Aussie rose as much as 0.6% to $0.7171.

"With trimmed mean inflation already higher than at the start of previous tightening cycles, the Reserve Bank of Australia may opt for a 50 bp hike at its June meeting," said Marcel Thieliant at Capital Economics.

Elsewhere the stronger dollar dented an attempted bounce for the yen , which had seen some support from safety flows and positioning for the risk of a policy shift. The yen last traded about 0.3% lower at 127.60 per dollar.

The Bank of Japan meets on Wednesday and Thursday and markets see some risk of adjustment to forecasts or even policy changes to try and arrest the currency's recent weakness.

The South Korean won was slammed to a two-year trough after North Korea pledged to boost its nuclear arsenal.

Sterling , which has dropped more than 2% on the dollar this week as soft retail sales data has prompted a re-think of Britain's rates outlook, hit a fresh 21-month low of $1.2560 on Wednesday.

Bitcoin , sold on Tuesday as investors dumped risky assets, hovered near a six-week low at $38,430.

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Commodities Markets

Gold prices have fallen. Should you buy more gold now?

Gold prices have fallen although the Russia-Ukraine war continues to fuel geopolitical tensions. This has worried investors who saw the yellow metal as a safe haven asset. Here are some of the reasons for the fall:

Gold does well when the world is in trouble. Global gold prices climbed to a high of $2,070 an ounce on March 8 following Russia’s invasion of Ukraine on February 24.

However, gold appears to have taken a U-turn. Its price started to move down gradually and briefly went below the psychological level of $1,900 on April 25.

Apart from the war, other factors are influencing asset prices such as changes in interest rates, inflation and demand for gold jewellery and bullion.

Take the case of demand for gold jewellery. India and China are the two key markets for gold purchases. Many parts of China are under restrictions due to Covid-19. This is expected to severely depress demand for gold jewellery in the near term as shops are closed. If the situation persists and the incomes of potential consumers get compromised, then demand may remain suppressed for a longer duration. Low demand in a key market can pull down gold prices.

Expectations of higher interest rates can also push investors away from gold. When interest rates are near zero, there is little opportunity cost of holding gold. But as interest rates start rising, investors may want to shift to bonds from gold. Comments by officials of the US Federal Reserve have pushed bond yields and lowered gold prices.

“As we are approaching the May 2022 US Federal Reserve policy meet, market participants are discounting an aggressive rate hike trajectory for this year and hence we are witnessing pressure on the safe haven metal,” said Navneet Damani, senior vice president – commodity & currency research, at Motilal Oswal Financial Services.

Rising interest rates also triggered volatility in stock markets globally as funds flowed back to the US from various countries. The dollar index (DXY) – a measure of the US currency’s value against a basket of currencies – has climbed 12 percent over the past year to 101.6.

Megh Mody, commodities and currency research analyst at Prabhudas Lilladher, pointed out the negative correlation between the DXY and gold.

“Strengthening dollar on the back of hiking of interest rates by the US Fed in May is an important reason for the fall in gold prices,” he said.

Where will gold prices go?

Although expectations of sticky inflation, rate hikes and volatility in the stock markets are influencing gold prices, actual outcomes may be quite different.

A few months ago, the US Federal Reserve had emphasised that inflation was transitory in nature. However, going by its commentary in recent times, the US Fed is now worried about rising inflation and is keen to tame it.

“Markets have already factored in a 50 basis point rate hike in May, but now traders have also piled into bets that the US central bank will go even bigger in subsequent months in order to tame soaring inflation,” said Sriram Iyer, senior research analyst at Prabhudas Lilladher. “Gold could find support on the back of geopolitical and macroeconomic uncertainties, especially after recent speculation emerged that quicker-than-expected interest rate hikes could dent economic growth.”

This means gold may remain volatile as financial market participants watch how efforts to tame inflation by raising interest rates work out.

“Gold prices per 10 grams could trade in a broad range with critical support at Rs 50,000, followed by Rs 48,000 and Rs 46,500, while rallies on the upside towards Rs 55,000 would be opportunities to exit long positions,” said Damani of Motilal Oswal.

However, Iyer expects the range to be narrower. “Any dips towards Rs 50,400 will be met with buying. Similarly, domestic gold could face headwinds at Rs 53,000,” he said.

What should you do?

Volatile gold prices can offer some money-making opportunities to savvy gold traders. Experts advise against selling gold now just because prices have fallen.

Long-term investors should be guided by their portfolio’s asset allocation. Allocation to gold should be kept at 5-10 percent. This is best achieved by staggering investments in gold ETFs and sovereign gold bond funds.

If gold prices shoot up too quickly, do not hesitate to rebalance your asset allocation.

Copper price rebounds as China steps up support for economy

The copper price recouped some of Monday’s losses after China pledged more support to help revive an economy that’s been imperiled by the escalating virus outbreak.

The metal fell on Monday to the lowest in three months with mounting concern about the outlook for demand due both to spreading lockdowns in China and the continuing war in Ukraine.

On Tuesday, copper rose as much as 2.3% in China as the country’s central bank vowed to increase monetary support to the real economy, especially for industries and small businesses hit hard by the pandemic.

That follows the People’s Bank of China’s decision Monday to cut the amount of money that banks need to have in reserve for their foreign currency holdings, an attempt to help limit the drop in the yuan.

Copper for delivery in July rose 1.6% from Monday’s settlement price, touching $4.54 per pound ($9,997 per tonne) on the Comex market in New York.

Click here for an interactive chart of copper prices

Fund managers have been increasing bearish bets on the CME copper contract over the last couple of weeks, Reuters columnist Andy Home reported.

“With declines in aluminum and nickel as well, the overall picture that emerges is that China’s weakened demand outlook is outweighing supply concerns, which were elevated after Russia’s invasion of neighboring Ukraine on Feb. 24,” wrote Reuters columnist Clyde Russell.

“Policy may be the salvation for China’s iron ore and base metal demand this year,” Vivek Dhar, commodities analyst at Commonwealth Bank of Australia, wrote in a note.

“Policymakers are hoping for a soft landing, helping stabilize commodity demand in the property construction sector,” while infrastructure investment in the country is also expected to rise significantly this year, he added.

INVESTORS DIARY 2022

Company

Event

Venue

Date & Time

Counters trading under cautionary

ART

Seed co Int.

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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