Bulls n Bears Daily Market Commentary : 06 December 2022

Tue Dec 6 21:49:57 CAT 2022

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Bulls n Bears Daily Market Commentary : 06 December 2022

 <mailto:marketing at willdale.co.zw> ZSE commentary

Market trades softer in Tuesday's session.

The market slipped into the red in Tuesday's session as losses in selected
heavies weighed down the ZSE. The mainstream All-Share retreated 0.45% to
14778.48pts while, the ZSE TopTen Index trimmed 0.51% to end the day on
8656.66pts. The ZSE Agriculture Index lost 1.16% to close at 71.57pts while,
the Mid-cap Index dropped 0.33% to 33079.31pts. Packaging group Nampak was
the worst faller of the day on a 8.62% dip to $7.3103. Trailing was
Mashonaland Holdings that slipped 4.57% to end at $17.1429. Cigarette
manufacturer BAT tumbled 3.55% to trade at $2990.0000 as banking group NMB
was 3.23% weaker at $30.0000. CBZ Holdings completed the top five losers of
the day on a 3.16% fall to $124.0000. Headlining the winners of the day was
Axia that surged 1.87% to $64.1960 post the announcement of the group's
delisting from the ZSE and subsequent listing on the VFEX. Banking group
First Capital improved 1.22% to $9.9818 while, telecoms giant Econet was
0.43% firmer at $73.7437. Zimre Holdings ticked up 0.08% to finish at
$4.4500 as seed processor Seed Co Limited capped the top five gainers of the
day on a 0.07% rise to $75.3500.

Volumes traded succumbed 94.31% to 2.64m shares while, turnover plummeted
73.04% to $269.12m. NMB and ECONET dominated the volume aggregate as the duo
contributed 44.91%. Other notable volume drivers were Delta (20.04%),
Ecocash Holdings (5.30%) and Axia (4.68%). Delta, Econet Cafca, Nmbz, and
Innscor contributed a combined 83.47% to the total outturn. Foreign
purchases amounted to $498,154.00 while, sales stood at $147,482,833.00.
Seed Co International and Simbisa dropped 3.27% and 11.05% to close at
US$0.3397 and US$0.3407. Padenga went up 4.57% to end pegged at US$0.2405
while, Bindura was stable at USD$0.0295 on 100 shares. The ETFs traded a
cumulative  total of 182,653 units and the only two that registered trades
were Datvest and MIZ. The MIZ ETF was 0.63% stronger $1.3887 while, the
Datvest TF rose 0.02% to $1.6804-efesecurities 

Global Currencies & Equity Markets

South Africa

South African rand steady ahead of Q3 GDP data

JOHANNESBURG - South Africa's rand was little changed in early trade on
Tuesday, ahead of the release of domestic growth data for the third quarter.

At 0650 GMT, the rand traded at 17.4700 against the dollar, near its
previous close of 17.4650.

The risk-sensitive currency has had a turbulent few days, as political
turmoil at home fuelled investor uncertainty, sending it over 4% lower
against the dollar at one point last week before making a recovery.

President Cyril Ramaphosa gained a lifeline last night, after South Africa's
ruling party said it would tell its lawmakers to reject a report that said
he may have committed misconduct and violated the constitution.

Meanwhile, Statistics South Africa will release the country's gross domestic
product (GDP) data at 0930 GMT, with economists polled by Reuters predicting
a 0.7% quarter-on-quarter growth and 2.8% year-on-year growth.

The dollar index, which measures the greenback against six major rivals, was
last up 0.22% at 105.45, helped by strong U.S. data that fuelled bets the
Federal Reserve may stick with hiking interest rates for longer.

The government's benchmark 2030 bond was marginally lower in early deals,
with the yield up 1 basis point to 10.615%.

Nigeria

Naira depreciation adds N9tn to foreign debt burden

The value of naira to dollar fell from N196.92 in June 2015 to N414.72 in
June 2022, worsening Nigeria's foreign debt burden.

Within the seven years under review, the naira depreciated by 52.52 per cent
against the US dollar.

The Monthly Average Exchange Rates of the Naira (Naira Per Unit of Foreign
Currency) for 2015 document obtained from the website of the Central Bank of
Nigeria shows that the one dollar was N196.92 for Inter-bank Foreign
Exchange Market.

The exchange rate for one dollar as of June 30, 2022, was N414.72, according
to the figure provided by the CBN.

The PUNCH recently reported that Nigeria's total external debt rose from
$10.32bn as of June 30, 2015, to $40.06bn as of June 30, 2022.

This showed that there was an increase of 288.18 per cent in seven years,
according to the external debt stock reports by the Debt Management Office.

A breakdown shows that in 2015, states had $3.27bn external debt while the
Federal Government had $7.05bn.

By 2022, states' external debt had risen to $4.56bn, while the Federal
Government's external debt was $35.5bn.

The debts include: loans from multilateral sources such as the World Bank,
the African Development bank and the International Monetary Fund, including
those from bilateral sources such as China, France, Japan, Germany and
India.

They also include debts commercial sources, which include Eurobonds and
Diaspora bonds.

If the CBN average exchange rate for June 2015 was used to weigh the
country's current $40.06bn foreign debt, Nigeria's external debt in naira
terms would have been N7.89tn.

However, with the exchange rate of N414.72 as of June 30 this year, the
total external debt in naira terms was N16.61tn, showing a difference of
N8.72tn.

By implication, it will cost Nigeria N8.72tn in naira terms if the country
decides to pay back the $40.06bn external debt in 2022. If this same debt
was incurred in 2015, Nigeria would have spent N8.72tn less, given the then
exchange rate of N196.92/$.

Reacting, the Managing Director/Chief Executive Officer of Cowry Asset
Management Limited, Mr Johnson Chukwu, said that high external debt would
impose a huge debt service on the economy.

He said, "This will impose a huge debt service on the economy, particularly
at a period when we have low revenue from oil sales. If the revenue from oil
sales does not improve, then the government will be struggling to meet that
debt service obligation to foreign lenders."

However, he noted that Nigeria could service its foreign debt at the current
level, but a constant increase in debt without a corresponding increase in
foreign currency earnings could put the country in a difficult position.

Policy failure

In a bid to manage the value of the naira, the CBN introduced a number of
policies such as stopping 41 items from accessing forex at the official
market, offering N5 for every $1 of funds remitted to Nigeria through
Internal Money Transfer Organisations, banning the supply of forex to Bureau
de Change, among others.

However, these policies have not been able to guarantee naira stability.

The World Bank has said it disagrees with the CBN on how it tries to achieve
price stabilisation of the naira, adding that the local currency should be
allowed to respond to real pressures, and not be bottled up by the CBN.

It added that the country's exchange rate strategy discouraged investors and
increased inflation risks.

A Global Finance Report has also said that the CBN has failed to curb rising
inflation and stop the naira from sliding against the US dollar.

The International Monetary Fund recently said that the long-term rate of the
depreciation of the naira equated to a loss of 10.6 per cent of its value
annually since 1973.

According to the IMF, this rate was 1.5 times higher than the long-term rate
of the currencies of other emerging markets and developing economies at 7.2
per cent, and sub-Saharan Africa at seven per cent over the same time
period.

The IMF said, "Its exchange rate underwent more persistent depreciation.
Nigeria's long-term rate of currency depreciation (on average 10.6 per cent
annually since 1973) was 1.5 times higher than both EMDE (7.2 per cent) and
SSA (seven per cent). Given limited availability of long-term data, it is
difficult to estimate the exact reasons."

The Bank of America recently said Nigeria's local currency unit was set to
weaken further next year as its current exchange rate to the dollar was well
above fair value.

According to a report by Bloomberg, "Three indicators, the widely-used
black-market rate, the central bank's real effective exchange rate, and our
own currency fair value analysis show the naira is 20 per cent overvalued.

"We see scope for it to weaken by an equivalent amount over the next
six-nine months, taking it to as high as 520 per USD."

During a workshop on tax expenditure organised by the ECOWAS Commission in
Abuja, financial experts advised that Nigeria and other West African
countries should move away from reliance on foreign assistance to finance
developmental projects in the region.

According to them, over-dependence on financial aid and external loans might
affect long-term prosperity for the entire region.

The Special Advisor to the Director (Custom Union and Taxation in ECOWAS),
Gbenga Falana, while emphasising that the debt profile of most of the
countries in the sub-region was mounting, stressed the need for West African
countries to look inwardly and finance local projects through effective
domestic resource mobilisation.

Supply, demand factors

Most experts who spoke with The PUNCH described the current situation as
naira devaluation, rather than depreciation.

 <mailto:info at bulls.co.zw> 

Global Markets

Dollar little changed after previous day's jump; investors look to Fed next
week

(Reuters) - The U.S. dollar was nearly unchanged against the euro and yen on
Tuesday after strong gains the day before, with investors trying to position
for next week's expected interest rate hike from the U.S. Federal Reserve.

The Australian dollar were down slightly. It rose earlier after the Reserve
Bank of Australia (RBA) raised rates for the eighth time in as many months.

Data Monday showing that U.S. services industry activity unexpectedly picked
up in November prompted speculation the Fed may lift interest rates more
than recently projected. Traders currently expect a half-point hike from the
Fed next week and they expect a terminal rate of just above 5% in May.

"There's not a lot of fresh incentives," said Marc Chandler, chief market
strategist at Bannockburn Global Forex in New York. "There was a lot of
price action yesterday, and we're just consolidating that," with the big
focus on next week's Fed meeting.

Next week's calendar also includes the release of the key consumer price
index data for November.

Investor sentiment appeared to be shifting as well, he said. "Previously, it
seemed to me people were willing to buy dollar dips, and now they seem to be
more enthusiastic about selling dollar bounces."

The U.S. dollar index , which measures the currency against six major peers,
remains up roughly 10% for the year so far. It was last up 0.1% on Tuesday.

The euro was flat against the dollar at $1.0492, while the dollar was down
0.1% against the Japanese yen .

European Central Bank policymaker Constantinos Herodotou said on Tuesday
interest rates will go up again but are now "very near" their neutral level.

The Aussie dollar was down 0.1% at $0.6690. It had risen earlier as the RBA
said it was not on a preset course to tighten policy but inflation was still
high.

The dollar was up 0.6% against the Canadian dollar ahead of the Bank of
Canada's rate decision Wednesday. Traders are pricing in a 73.3% chance of a
dialed-down 25 basis-point hike from the BoC, although a slim majority of
economists polled by Reuters are expecting a 50 basis point rate hike.

The Western price cap on Russian seaborne crude, which came into force on
Monday, may start to show its impact on the energy market soon, said
Francesco Pesole, FX strategist at ING.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold firms as dollar's push stalls, yields ease; focus on Fed

Gold rose on Tuesday as the dollar gave up some of its recent gains and U.S.
Treasury yields retreated, with traders awaiting further direction from the
Federal Reserve's interest rate hike strategy.

Spot gold rose 0.14% to $1,770.89 per ounce. U.S. gold futures gained 0.1%
to $1,783.30.

"Gold remains tied to the dollar and has found a fresh bid as it weakens,"
said Ole Hansen, head of commodity strategy at Saxo Bank,

Also, considering the market only lost about 2% on Monday on a day that saw
a strong U.S. data print (ISM) and a reduction in ETF holdings, the "gold
market still has some underlying strength", Hansen added.

Better-than-expected U.S. services industry data spooked investors on Monday
and raised fears that the Fed might stick longer with aggressive rate
increases.

As a result, bullion dropped from a five-month high to close 1.6% lower as
the dollar rebounded after the data. But the dollar has since lost some
ground, making gold more attractive, especially for overseas buyers.

"With the Fed due to meet next week, the direction of prices is likely to be
determined on how the U.S. central bank sees the glide path for future rate
rises," said Michael Hewson, chief markets analyst at CMC Markets.

The final Fed meeting of 2022 is scheduled on Dec. 13-14.

However, "signs of stronger-than-expected demand may lead markets to revisit
more hawkish expectations", said IG Market strategist Yeap Jun Rong.

High rates have dimmed gold's traditional status as a hedge against high
inflation and other uncertainties this year to some extent, as they
translate into higher opportunity cost to hold the non-yielding asset.

Spot silver rose 0.2% to $22.2923 per ounce, while platinum eased 0.1% to
$996.38. Palladium shed 0.8% to $1,861.60.

INVESTORS DIARY 2022

Company

Event

Venue

Date & Time

National Unity Day

December 22

Christmas Day

December 25

Boxing Day

December 26

Counters trading under cautionary

CBZH

Meikles

Fidelity

TSL

FMHL

Turnall

GBH

ZBFH

GetBucks

Zeco

Lafarge

Zimre

Invest Wisely!

Bulls n Bears 

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DISCLAIMER: This report has been prepared by Bulls 'n Bears, a division of
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opinions expressed and recommendations made are subject to change without
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