Bulls n Bears Daily Market Commentary : 21 March 2022

Mon Mar 21 17:51:11 CAT 2022

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Bulls n Bears Daily Market Commentary : 21 March 2022

ZSE commentary

The ZSE shares opened the week in the positive as heavyweight counters
continue to lift the bourse. Activity levels were at 420 trades. Ecocash was
the most active stock at 32 trades followed by Delta and Star Africa at 31
and 30 trades respectively. Investor sentiment was positive after the
session yielded 24 risers against 10 fallers while five (5) of the active
stocks remained unchanged. Mash anchored volume aggregate trading 1,237,700
shares and Delta anchored value aggregate with a value of ZW$58.77 million.
The All-Share Index added 3.95% to close at 15,467.15 points. The Top 10
Index added 4.28%. The Top 15 Index added 4.20%. The Medium Cap Index was up
by 3.48% to 25,072.37 points whilst the Small Cap Index added 0.13% to
391,745.18 points. Leading the risers pack of the day was Rio Zimbabwe
closed 19.23% higher and African Distillers was up by 18.18%. Axia added
10.91% and First Mutual Properties added 7.94% to 755.56c. Mitigating the
gains were losses in African Sun  and Truworths which shaded 9.31% and 6.17%
respectively. Tanganda was down by 4.11%. General Beltings Holdings and NMB
Holdings shaded 2.72% and 2.06% respectively.

The ETFs traded 1,441,790 units worth ZW$6,695,548.77 in 129 trades. The Old
Mutual Top 10 ETF added 6.00% to close at 791.41c while the Morgan and Co
Multi Sector ETF shaded 0.20% to close at 1395.14c. The Datvest MCSI ETF
added 1.03% to close at 168.84c. On the VFEX, Bindura traded 616,948 shares
to close down to US 5.50 cents. wealthaccesssecurities

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets

Egypt

Egyptian pound drops nearly 14% after Ukraine war prompts dollar flight

(Reuters) - Egypt's pound depreciated by almost 14% on Monday after weeks of
pressure on the currency as foreign investors pulled out billions of dollars
from Egyptian treasury markets following Russia's invasion of Ukraine.

The pound dropped to 18.17-18.27 against the dollar, Refinitiv data showed,
after having traded at around 15.7 pounds to the dollar since November 2020.

The central bank also hiked overnight interest rates by 100 basis points in
a surprise monetary policy meeting.

Egypt has been in discussions with the International Monetary Fund about
possible assistance, people close to the negotiations have said, but it has
not announced any formal request.

"This is a good move to make as the devaluation of the pound moves it
roughly in line with its fair value and it could pave the way for a new IMF
deal," said James Swanston of Capital Economics.

"However, it will be key whether policymakers now allow the pound to float
more freely or continue to manage it and allow external imbalances to build
up once more, possibly resulting in future step devaluations like today's in
the future."

The IMF in Cairo was not immediately available for comment.

Monday's weakening of the pound could catalyse inflows of foreign currency,
while investors who already had money in Egyptian treasuries would be
unlikely to sell now, said Farouk Soussa, senior economist at Goldman Sachs.

"The move is designed to trap liquidity in the market and bring in investors
who might be sitting on the sidelines waiting for the pound to bottom out,"
he said.

But it would also likely add to inflation and possible local dollarisation.

"The big question is whether this is enough, or if more might be needed to
entice portfolio investors," Soussa said.

HIGHER WHEAT IMPORT PRICES

Shortages of dollars have led to blockages at Egyptian ports, after
importers could not obtain necessary foreign currency for letters of credit
to get their goods cleared, bankers said.

The war in Ukraine has also left Egypt facing higher costs for its
substantial wheat import needs as well as a loss in tourism revenue from
Russian and Ukrainian visitors to Red Sea resorts. Russia and Ukraine are
the main suppliers of wheat to Egypt, which is often the world's largest
importer.

The higher wheat prices could nearly double annual state spending on wheat
imports to $5.7 billion, according to a study last week by the International
Food Policy Research Institute, straining government finances and fuelling
inflation pressure.

Headline inflation has accelerated to its highest level in nearly three
years, registering 8.8% last month and touching the upper limit of the
central bank's 5-9% target range.

Prime Minister Moustafa Madbouly set the price of unsubsidised bread on
Monday at 11.5 Egyptian pounds ($0.66) per kilogram, according to a
statement from his office. Prices had jumped as much as 25% because of
disruption to wheat imports caused by Russia's offensive in Ukraine. read
more

The central bank cited global inflationary pressures amplified by the war in
Ukraine for its hike in rates, which lifted the overnight lending rate to
10.25% and its overnight deposit rate to 9.25%.

State-owned Banque Misr and National Bank of Egypt said on Monday they were
offering certificates of deposit with a yield of 18%.

The Thomson Reuters Trust Principles.

South Africa

South African Rand's Rollicking Start to 2022 to Fade, Forecasts Nedbank

The South African Rand has enjoyed a strong start to 2022 but this support
is expected to fade over coming months according to local lender and
investment bank Nedbank.

In a monthly currency briefing Nedbank finds the Rand has benefited from a
cocktail of elevated global commodity prices and a stable domestic economy
that continues to offer global investors ample returns, particularly when
contrasted to less stable Emerging Markets.

But, rising oil and energy prices will mean the Rand will come under
pressure later in 2022 as domestic economic growth rates fade, although a
significant depreciation is unlikely.

"The boost provided to the rand by a large trade and current account surplus
over the past two years is likely to fade and ultimately reverse," says
Nicky Weimar, Senior Economist at Nedbank.

The Rand has appreciated by 7.0% year to date on a trade weighted basis,
i.e. the Rand is up against a basket of currencies belonging to its most
important trading partners.

The advance has surprised some investors given the Rand and other 'high
beta' currencies would typically be expected to depreciate during times of
heightened investor anxiety, of the kind provided by Russia's invasion of
Ukraine.

But like other currencies that derive much value from the export of raw
materials and commodities, the Rand has found support.

"The rand and other commodity-based currencies benefitted from the surge in
metal prices as sanctions on Russia's commodity exports fuelled fears of
supply shortages.

This is also the case for the Australian and New Zealand Dollars, which are
both currencies that tend to depreciate during times of global investor
anxiety but are finding the current set of circumstances peculiar to the
Russian invasion of Ukraine to be supportive.

But for the Rand, the South African economy can also be credited for its
ongoing resilience.

The Institute of International Finance's (IIF) database on portfolio flows
to Emerging Economies (EM) shows foreigners sold out of most EM's but
returned to the South African equity market.

"South Africa offered investors looking for some EME exposure the benefit of
deep financial markets, cheap market valuations, and relative macroeconomic
stability compared to Russia, Ukraine, Turkey, and even Brazil," says
Weimar.

SA outperforms

Secure a retail exchange rate that is between 3-5% stronger than offered by
leading banks, learn more.

South African monetary policy is also proving a helpful source of support
for the local currency, with the South African Reserve Bank (SARB) raising
interest rates and increasing the returns offered to foreign investors on
South African monetary assets such as bonds.

In January the SARB raised the Repo Rate for a second time, taking it to
4.0%

But the SARB is not expected to stop hikes at 4.0% as money markets are
currently pricing in a further 200 basis points of hikes for the remainder
of 2022.

However, Nedbank finds these expectations might be too aggressive and there
is scope for disappointment if fewer hikes are actually delivered.

This is considered by Nedbank to be one downside risk facing the currency
over coming months.

Furthermore, global risk appetite is likely to remain fragile in 2022 as
investors deal with a mix of issues that include the war in Ukraine, surging
global inflation, Covid-related supply chain bottlenecks and rising interest
rates at the U.S. Federal Reserve.

"Russia's war on Ukraine and the disruptions to the global commodity markets
are likely to reinforce risk-off sentiment, clouding the outlook for
inflation and global growth. Risk appetites will also be tested by the
relatively steep rate-hiking path signalled by US Fed," says Weimar.

South Africa's export prices may still hold up better than initially
expected, according to Nedbank, as risk-off sentiment among global investors
and the search for safe-haven investments favours precious metals.

Sanctions against Russia's exports amid already strained supplies could keep
other metal prices elevated.

But South Africa is an energy importer and the elevation of crude oil prices
could pose economic headwinds.

Nedbank says crude oil and refined petroleum together account for 16.4% of
total imports, while intermediate and capital imports combined account for
58.6% of total imports.

SA imports and exports

South Africa is also expected to feel the effects of sharply higher energy
prices and the general rise in intermediate and capital goods prices due to
supply chain bottlenecks.

"Consequently, import prices are expected to increase at a faster pace than
those of exports, resulting in a further deterioration in the SA's terms of
trade," says Weimar.

Nedbank forecast South African economic growth of 1.7% for 2022.

"Over time the less favourable global environment is expected to catch up
with the rand. The currency is still expected to come under moderate
pressure later this year," says Weimar.

Nedbank forecast the South African Rand to trade at 15.15 against the U.S.
Dollar by mid-year, with the Pound to Rand exchange rate forecast to trade
at 20.23.

Against the Euro the Rand is expected to trade at 16.69.

For year-end the respective point forecast targets are 15.15, 20.23 and
16.69.

 <mailto:info at bulls.co.zw> 

Global Markets

Pound Rand Outlook Today: GBP/ZAR Fluctuates Following BoE's Dovish Rate
Hike

The Pound to South African Rand (GBP/ZAR) exchange rate struggled to find
any strong directional bias this week, with the pairing left to trade
between ZAR19.5808 and ZAR19.7909.

Pound (GBP) Exchange Rates Rocked by BoE's Dovish Rate Hike

The Pound (GBP) opened this week on some steady footing, with the currency
making some tentative gains against the South African Rand (ZAR) and the
majority of its other peers.

This was aided by the publication of the UK's latest jobs report. Data
published by the Office for National Statistics (ONS) revealed unemployment
in the UK fell to a pre-pandemic low of 3.9% in January, while also
reporting a stronger-than-expected bump in wage growth.

The upbeat figures helped to bolster expectations ahead of the Bank of
England's (BoE) interest rate decision on Thursday.

This saw the BoE deliver its third consecutive rate hike as was widely
expected, raising interest rates from 0.5% to their pre-pandemic levels of
0.75%.

However, with the hike largely priced in, the focus for GBP investors was
primarily on the bank's forward guidance, which triggered a sharp Sterling
selloff as policymakers proved more dovish than expected.

While the bank's policy statement suggested 'further modest tightening' may
be warranted in the future, the vote to raise interest rates this month
wasn't unanimous, signalling the BoE may be reluctant to go much further.

bannerIn addition, the BoE's latest economic forecasts were gloomier as it
warned of weaker growth amid the cost-of-living crisis.

the BoE's policy statement read: 'Consumer confidence has, however, fallen
in response to the squeeze on real household disposable incomes. That impact
on real aggregate income is now likely to be materially larger than implied
by the projections in the February Report, consistent with a weaker outlook
for growth and employment, all else equal.'

South African Rand (ZAR) Exchange Rates Mixed on Fluctuating Risk Appetite
and Commodity Prices

Meanwhile, fluctuating market risk appetite has also led to mixed trade in
the South African Rand (ZAR) this week.

The Rand initially stumbled as while signs of progress in Ukraine-Russia
peace talks helped to bolster market risk appetite, it also resulted in
commodity prices softening. Removing a key source of support.

ZAR exchange rates then began to appreciate in the middle of the week as
some robust domestic retail sales figures as well as a pullback in the US
Dollar (USD) helped to make the Rand more attractive to investors.

The Rand then closed the week on a positive note as markets grew anxious
amidst signs that Ukraine-Russia peace talks may be stalling, prompting
prices for key commodity exports such as gold and palladium to begin rising
again.

GBP/ZAR Exchange Rate Forecast: SARB Rate Hike to Buoy the Rand?

Looking ahead to next week's session, the Pound to South African Rand
(GBP/ZAR) exchange rate could face some headwinds as the South African
Reserve Bank (SARB) is expected to conclude its March policy meeting with an
interest rate of its own.

However, the Rand could stumble ahead of the SARB rate decision, with the
publication of South Africa's latest employment figures on Tuesday. These
are expected to report domestic unemployment continued to rise in the last
quarter of 2021.

Meanwhile, the publication of the UK's consumer price index is expected to
report inflation continued to climb last month. Given the BoE's apparent
apprehension when it comes to further interest rate hikes, could the latest
rise prove a liability for the Pound?

Also influencing GBP exchange rates will be the UK's latest PMI releases,
with March's preliminary figures providing the first look at how the war in
Ukraine may have impacting economic activity. Expect Sterling to stumble if
growth took a hit this month.

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 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold up as Ukraine fighting boosts safe-haven demand

(Reuters) - Gold prices rose on Monday as fighting in Ukraine boosted demand
for safe-haven bullion, while investors kept a close tab on Moscow-Kyiv
peace talks.

Spot gold rose 0.61 % to $1,932.71 per ounce by 10:56 a.m. ET (1456 GMT).
U.S. gold futures rose 0.3% to $1,934.30.

"Another escalation around Ukraine will drive significant safe haven flows
to gold, even inflation hedge moves if we see sanctions that trigger another
commodity surge," said Craig Erlam, senior market analyst at OANDA.

Russia and Ukraine were nearing agreement on "critical" issues, Turkey's
foreign minister said on Sunday, but demand for riskier assets retreated and
oil prices climbed as fighting continued in Ukraine. read more

Last week, gold shed more than 3% on hopes for progress in the talks and a
U.S. interest rate hike. read more

"As real interest rates creep up, appetite for gold as an inflation hedge
could diminish," analysts at Heraeus precious metals wrote in a note.

Atlanta Federal Reserve Bank President Raphael Bostic said on Monday he was
open to more aggressive policy tightening, while pencilling in six rate
hikes for 2022.

"However, even if the Fed's upper estimates of rate raises become reality,
inflation will still be ahead, and real interest rates negative, maintaining
a positive environment for gold in the medium term," Heraeus analysts said.

Spot silver rose nearly 1% to $25.19, platinum was up 1.8% to $1,040.07, and
palladium rose 2.4% to $2,550.97.

The Ukraine conflict coupled with COVID-related restrictions in
semiconductor fabrication hubs in China could hurt automotive demand for
metals such as palladium, used as an autocatalyst in vehicle exhausts to
curb emissions, Heraeus added.

The Thomson Reuters Trust Principles.

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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