Bulls n Bears Daily Market Commentary : 12 May 2022

Fri May 13 08:30:32 CAT 2022

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Bulls n Bears Daily Market Commentary : 12 May 2022

 <mailto:info at bulls.co.zw> 

ZSE commentary

Bloodbath on the bourse.

The market closed the penultimate session of the week in a bloodbath as
twenty-four counters registered losses against a mere nine risers. The
All-Share Index was down 4.87% to 22942.36pts while, the Old Industrials
lost a further 4.91% to settle at 75603.31pts. The Blue-Chip Index was the
major casualty amongst its kind as it let go 5.86% to 14780.46pts while, the
Mid-Cap Index shed 2.15% to close at 40820.84pts. ZB Financial holdings led
the laggards of the day as it dipped 14.71% to settle at $81.0217 while,
Meikles followed on a 14.58% slump to $205.0000. First Mutual Holdings
trimmed 12.84% to trade at $19.0000, post the release of its Q1 trading
update in which the insurer registered a 36% surge in revenue to $212.06m.
Mashonaland Holdings closed the day pegged at $3.2025 after retreating
12.53%. Bankers CBZ went down 9.11% to $129.9677 as it capped the top five
fallers of the day.

Leading the winners of the day was Fidelity Life Assurance that buttressed
prior sessions' gains by 8.11% to $20.0000, trailed by Art holdings that
advanced 6.57% to $23.0000. Tea manufacturer Tanganda put on 4.89% to close
at a vwap of $243.5115 while, hotelier African Sun rose 1.08% to $12.1304.
Rainbow Tourism Group capped the top five gainers' list on a 0.08% lift to
$7.4500. Activity aggregates declined in the session as reflected in
turnover that dipped 79.44% to $224.61m while, volumes traded dropped 63.31%
to 1.61  shares. Econet, Edgars and Delta were the most sought-after stocks
as the duo claimed a combined 57.25% contribution of the volumes traded.
Heavies Econet and Delta accounted for 39.85% and 25.56% of the value
aggregate respectively. The three ETFs traded mixed in the session, as
Datvest MCS and the Old Mutual ETF declined 4.77% and 0.80% respectively
while, the Morgan and Co ETF increased 13.95% to $25.0000. Elsewhere, on the
VFEX, Bindura was stable at US$0.0475 as 38,370 shares exchanged hands.EFE
Securities

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets

South Africa

Rand hits the skids against the dollar as South Africans face R3 a litre
petrol price hike in June

An already fragile rand was back on the ropes in trade on Thursday (12 May),
put there by a strong dollar benefitting from risk aversion.

Bloomberg reported that Wednesday's hotter-than-expected US inflation
reading has revived concerns of a 75 basis-point rate increase by the Fed,
rather than the 50 basis-point pace that markets have come to grips with.

Worries about the impact of rising rates on economic growth, combined with
the war in Ukraine and slowing Chinese demand amid Covid lockdowns, are
battering risk assets, it said.

"We're seeing the beginning of the capitulation and the great reset, if you
want, in pricing," Virginie Maisonneuve, global chief investment officer for
equity at Allianz Global Investors UK, said on Bloomberg Television. "Right
now the big question is peak inflation."

US inflation is remaining persistently high, raising the prospect of
aggressive Fed rate hikes and keeping the dollar on the front foot, noted
Treasury One.

It noted that US CPI grew by 8.3% YoY versus market estimates of 8.1%, but
the concern was more around Core CPI, which jumped by 0.6% MoM versus the
expected 0.3%. The rand, which had firmed to below R16.00 earlier, weakened
to R16.17 levels post the CPI data, before eventually closing firmer at
R16.09 on the day.

"This morning we see increased risk aversion as the dollar strengthens
further, and we have the rand trading sharply weaker at R16.21."

Bianca Botes, director at Citadel Global said that global markets anticipate
that the aggressive tightening by the Fed will continue as a result of
rising US inflation, with hikes of 50bps at each of the upcoming Federal
Open Market Committee (FOMC) meetings this year.

"The dollar saw some weakness across the board yesterday but quickly
recovered during Asian trade this morning. This afternoon we will also keep
an eye on US PPI and jobless claims," Botes said.

The rand traded at the following levels against leading currencies:

Dollar/Rand: R16.20 (0.86%)

Pound/Rand: R19.76 (-0.19%)

Euro/Rand: R16.95 (0.22%)

Cost pressures unrelenting for agriculture

Following the finance minister's generous accommodation of an almost two
months reprieve in the fuel price that entailed a R1.50 cents per litre
reduction in the general fuel levy, farmers face a hefty fuel bill next
month as the intervention period lapses, noted Paul Makube, senior
agricultural economist at FNB Agri-Business.

"The R1.50 cents/ litre will be back into the fuel calculation - and
considering the exchange rate depreciation of 9.0% month-on-month (m/m) and
11.4% year-on-year (y/y) so far with crude weakening by 5.4% m/m and 59.0%
y/y, a further R3/ litre in fuel increases is possible in June 2022 if the
relief measures are not extended or a new fuel price determination is
implemented," he said.

Furthermore, indications are that the interest rate hikes will be aggressive
going forward following a second increase of 25 basis points in March which
brought the repurchase rate to 4.25%.

"Farmers, therefore, face higher debt serving costs in a record-high input
cost environment," said Makube.

"We are heading into increased activity in the agriculture calendar and
demand and consumption of fuel is high. The escalation in fuel costs does
not bode well for producers as production costs are likely to escalate
across the value chains that manifest differently from planting, harvesting,
distribution and packaging."

Makube said that summer grain and oilseed harvest is in its infancy and will
start ramping up in June while cultivation operations for winter crops are
currently in full swing. Grain producers and logistics companies in the
agriculture value chain will feel the pain as closer to 80% of grain is
transported by road.

"Livestock and horticulture with citrus harvest in its infancy will also be
affected in terms of distribution across the country and for exports. This
will obviously push food inflation to remain above 6% in the near term," the
economist warned.

Social unrest warning

Surging international food prices will hit Africa's economies the hardest
and may trigger social unrest if governments fail to cushion the blow,
according to a report by Oxford Economics Africa.

Food has a heavier weighting in the inflation baskets of African nations,
compared with those in advanced economies, due to purchasing patterns.

In advanced economies, it accounts for as much as 15% of the basket, while
in Africa it exceeds 25%, with some countries including Ethiopia, Zambia,
Sudan, and Nigeria having food weightings above 50%, economists Jacques Nel
and Petro van Eck, at Oxford Economics Africa said in a research note.

The war in Ukraine, bans on food exports such as palm oil, supply chain
glitches and a drought curbing the US wheat crop have sent prices
skyrocketing, Bloomberg reported. In March the UN's FAO food price index
soared 13%, the fastest pace on record, before easing slightly in April.

Higher food prices coupled with soaring fuel bills and rising unemployment
make for a volatile political environment on the continent and have prompted
governments to react even at the expense of fiscal consolidation, said Nel
and van Eck.

Egypt and Nigeria have delayed plans to end costly food and fuel subsidies
while Morocco, Kenya, and Benin have increased minimum wages and South
Africa has extended monthly stipends for the jobless and cut its general
fuel levy for two months.

Nigeria

Naira down to four-month low against dollar

The currency pushed towards N600.00 to a dollar at the parallel market on
Thursday.

Naira hit a four-month low Thursday, depreciating 0.30 per cent against the
U.S. dollar at the official market.

The currency which opened trading at N416.50 closed at N420.00 to a dollar
at the close of business on Thursday, data published by FMDQ, where forex is
officially traded showed.

This represents a N1.25 or 0.30 per cent devaluation from N418.75 it traded
in the previous market session on Wednesday.

The naira hovered within an intraday high of N412.38 and slipped to a low of
N444.00 before closing at N420.00 per $1 on Thursday.

This is the weakest rate the naira exchanged officially with the dollar in
nearly five months after closing at N422.67 to a dollar on January 5, early
this year.

Within the past four months, the currency has been trading between the range
of N417.00-N419.00 and above mark before settling at N420.00 at the close of
sales Thursday.

Forex supply jumped by 38.20 per cent with $160.00 million recorded at the
close of business on Thursday against the $115.78 million posted in the
previous session Wednesday.

Similarly, the local currency pushed towards N600.00 to a dollar at the
parallel market on Thursday.

Uyo currency dealers exchanged the naira at N592.00 and sold N596.00 to a
dollar, while Abuja black market dealers at Wuse Zone 4 said the currency
was exchanged at N590.00 and sold at N593.00 per $1 on Thursday.

 <mailto:info at bulls.co.zw> 

Global Markets

The Rising Dollar Is Wreaking Havoc With US Trade

In 1995, Treasury Secretary Robert Rubin asserted that a strong dollar is in
the US national interest, a mantra repeated by each of his successors.
They're partially correct since the effects of the robust buck, which has
soared this year, help some while harming others.

The rising greenback makes US imports cheaper, favoring American consumers.
Ditto for US businesses that import manufactured goods and services,
important offsets to surging domestic inflation. Commodities are the
exception. Of my list of 45 that are traded internationally, 42 are priced
in dollars, including crude oil and other hydrocarbons; corn, wheat,
soybeans and other agricultural products; base metals such as lead, zinc,
copper and aluminum; and gold, platinum and silver. The three exceptions are
palm oil, priced in Malaysia ringgit, wool traded in Australian dollars and
amber priced in Russian rubles.

So, the rising dollar doesn't affect their dollar prices directly, but does
make them cheaper to Americans indirectly as higher dollar costs reduce
global demand by pricing foreigners with weak currencies out of the market.
In effect, the robust greenback depresses economic growth.

The stronger dollar also retards American exporters by making their products
more expensive for foreign buyers in their own currencies. Microsoft Corp.
said in its earnings report last month that a strong dollar reduces its
revenue. It also forces domestic producers to cut their costs and shave
their profit margins in order to compete here and abroad. Conversely,
foreign exporters to the US can reduce their dollar prices somewhat and
still increase their revenues in their own currencies.

The detrimental effects of a robust buck on American multinationals are
shown in the foreign trade numbers. Since the beginning of 2020, US exports
have risen from $2.46 trillion to $2.91 trillion but imports jumped from
$3.01 trillion to $4.22 trillion. So, the foreign trade deficit expanded
from $546 billion to $1.32 trillion. Faster economic growth here than abroad
also hypes US imports.

With the pandemic subsiding, Americans are re-emphasizing services including
foreign travel, and their dollars buy more yen, euros and sterling to spend
abroad. But US businesses that cater to foreign visitors such as hotels,
resorts and car rental companies find visitors from abroad with fewer
dollars to spend.

About 80% of $100 bills reside outside the US, especially in Russia,
according to Markos Kaunalakis, a visiting fellow at the Hoover Institution.
As of 2019, $31.5 billion worth of portraits of Benjamin Franklin were
stashed in mattresses and money belts. Since the cost of printing those
bills is tiny, the seigniorage is considerable and provides a huge windfall
for the US Treasury.

At the same time, the robust buck is distracting attention from
cryptocurrencies. Bitcoin's price is down 54% from its $67,802 peak last
November to $31,299. Stablecoins are meant to keep their value at $1, but
TerraUSD, the third-largest stablecoin, plunged to 30 cents on May 11 as
holders doubted that its peg to the rising dollar could be held.

As the dollar climbs, US investors can buy more foreign securities, but that
also puts pressure on domestic companies that produce superior earnings in
dollar terms. And foreign investors in American securities have the wind at
their backs as the robust buck gives them currency translation gains on top
of dollar-denominated investment results. Take 10-year sovereign yields,
where Treasury notes provide higher yields than their counterparts in 15
other developed countries. The 3.04% US yield is 2.81 percentage points
better than Japan's 0.23%, 2.14 points above Switzerland's 0.90% and 2
points higher than Germany's 1.04%.

The strong dollar isn't universally helpful to American consumers and
investors. Still, in addition to being a haven in a sea of global turmoil,
it does tell investors worldwide that the US is the best place to be.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold price is in a 'danger zone' as prices drop another $30

(Kitco News) The gold market is in a "danger zone" as prices move closer to
$1,800 an ounce, according to analysts.

Another spike in the U.S. dollar trigged a drop in gold Thursday, with June
Comex gold futures touching a low of $1,820.40 an ounce and last trading at
$1,822.30, down 1.7% on the day. In the meantime, the U.S. dollar index
soared to a fresh 20-year high, last at 104.80.

Gold has solid support at the $1,800 an ounce level, but a break below could
lead to a steeper selloff.

"The dollar has firmly put gold in the danger zone and a break of the $1,800
level could lead to further technical selling," OANDA senior market analyst
Edward Moya. "Gold can't attract any attention until this move in the dollar
ends."

Gold's struggle after below the $1,900 an ounce level has coincided with a
selloff in the U.S. stock market. Investors have been transitioning to
risk-off sentiment on fears around the Federal Reserve's ability to fight
inflation without triggering a recession.

"Right now, Treasury yields and the stock market are both declining, which
should suggest we are getting close to a capitulation with this de-risking
moment on Wall Street. If gold breaks below the $1,800 level, technical
selling could support a drop towards $1,750," Moya added.

The broad market selloff is creating a liquidity vacuum, which has also been
hurting gold, said strategists at TD Securities.

"Substantial selling flow continues to weigh on the yellow metal at a time
when liquidity is scarce," the strategists said Thursday. "Prices are now
struggling to hold onto the bull-market-era defining uptrend in the yellow
metal under the pressure of this selling flow . With the Fed telegraphing
their every move, positioning analytics are going to be key as the market
continuously squeezes participants after bearish sentiment builds."

Thursday afternoon, markets also digested the U.S. Senate confirming Federal
Reserve Chair Jerome Powell for his second term in an 80-19 vote.

The vote showed broad support for Powell after the Federal Reserve decided
to raise rates by 50-basis-points in May, the steepest hike since 2000.

Gold price is manipulated by the Fed, suspects mining tycoon Frank Giustra,
but suppression can't last forever

The markets are currently pricing in a 93% chance of an additional 50-bps
hike in June and a 90% chance of another 50-bps hike in July, according to
the CME FedWatch Tool.

"Inflation will probably remain higher than before the pandemic because wage
costs for example are rising sharply due to the tight labour market," said
Commerzbank analyst Daniel Briesemann. "The Fed thus remains under pressure
to raise interest rates significantly. Our economists expect rate hikes of
50 basis points at each of the Fed's next three meetings. The key rate is
likely to reach 3.0% by the end of the year."

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
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