Bulls n Bears Daily Market Commentary : 18 May 2022

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Bulls n Bears Daily Market Commentary : 18 May 2022

 

 	

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ZSE commentary

 

Market falters as aggregates remain depressed.

Activity aggregates were depressed in a dull trading session in which
volumes plummeted 74.08% to close at 0.78m shares, in resemblance turnover
dropped 72.13% to $92.22m. Econet, Delta, Ecocash and Innscor were the top
value drivers as they accounted for a collective 77.03% of the outturn. Top
volume leaders of the day  were Econet (19.47%), Ecocash (11.00%), Delta
(10.75%) and Mashonaland (10.56%). Leading the fallers' pack was Hippo that
succumbed 14.96% to end pegged $340.1786, trailed by First Mutual Holdings
that slumped 14.85% to $16.1777. TSL tumbled 14.25% to settle at $97.7500,
as RioZim shed 13.75% to $111.2625. Turnall trimmed 13.43% to cap the top
five fallers' category at $5.5581. Partially mitigating today's losses were
gains in property concern FMP that garnered 12.48% to close at $7.4205
followed was National Foods which surged 6.45% to settle at $2200.0000.
Agriculture concern Ariston added 4.80% to $3.6869 while, bankers ZB
Financial Holdings put on 4.47% to close at $83.0000. First Capital Bank
Limited rounded off the top five gainers of the day as it improved 1.85% to
end the day at $9.9887.

 

Thirty-one stocks registered price movements in the session distributed into
twenty fallers and eleven risers to leave the market with a negative breadth
of nine. The market recorded a further drop during the mid-week's session as
the All-share Index lost 1.82% to close at 20986.91pts while, the Industrial
Index declined 1.74% to 69250.71pts. The Blue-Chip Index fell 1.50% to
13494.55pts while, the Mid-Cap Index retreated 2.68% to 37572.53pts. On the
VFEX, Bindura jumped 6.74% to trade at USD$0.0491 as 1,932 shares exchanged
hands. The Datvest ETF advanced 8.07% to $2.0901as the Morgan and Co ETF
went up 8.36% to $25.0000. Contrastingly, Old Mutual ETF eased 0.61% to
$9.2450. In other news, General Beltings has issued a cautionary advising of
its intention to consummate minority stake in the company. EFE Securities

 

 <mailto:info at bulls.co.zw> 

 

Global Currencies & Equity Markets

 

 

South Africa

 

Rand weakens after inflation, retail sales data

Expected higher interest rate and cost environment suppressing sentiment:
economist.

The South African rand weakened against the dollar on Wednesday, after
inflation held steady at the top of the central bank's target range and
retail sales numbers disappointed, a day before the central bank announces
its interest-rate decision.

 

By 20:29, the rand traded at 16.0201 against the dollar, 0.63% weaker than
its previous close.

In April, consumer price inflation remained at a five-year high of 5.9%, in
line with a Reuters poll and just within the central bank's 3%-6% target
range, according to data published by Statistics South Africa earlier on
Wednesday.

 

Retail sales rose 1.3% year-on-year in March, slightly below expectations of
1.5% and a 0.3% fall from February, according to data also published on
Wednesday by the statistics agency.

 

"March's modest reading evinces the financial pressure many households are
still facing in the current economic environment," Investec economist Lara
Hodes said in a note.

 

"An expected higher interest rate and cost environment is clearly
suppressing sentiment."

 

A stronger dollar also weighed on riskier assets worldwide, including the
rand.

 

On the Johannesburg Stock Exchange (JSE), the All-Share index ended down
0.88% at 69,083 and the blue-chip index of top-40 companies closed down
0.84% at 62,494 points, driven by a fall in resources companies.

 

Tech stocks on JSE also closed lower, including index heavyweight Naspers,
which closed down almost 5%, while its subsidiary Prosus ended down over 3%.

 

Investors now await the South African Reserve Bank's monetary policy
decision, due on Thursday.

 

A Reuters poll published on Friday forecast the bank would make its first 50
basis-point repo rate hike in more than six years, taking it to 4.75%, to
prevent potential second-round effects from higher consumer prices.

 

In fixed income, the yield on the benchmark 2030 government bond dipped two
basis points to 9.980%.

 

 

Nigeria

 

Election funding driving Nigerian naira to new lows

The naira weakened to 600 against the greenback this week in the unregulated
field, according to Abubakar Mohammed, a bureau de change operator that
tracks the data in Lagos, the commercial capital.

 

Politicians in Nigeria are buying dollars to fund vote hunting in primary
elections that start over the weekend, driving the local currency to new
lows in the unauthorized parallel market, reports Bloomberg.

 

The naira weakened to 600 against the greenback this week in the unregulated
field, according to Abubakar Mohammed, a bureau de change operator that
tracks the data in Lagos, the commercial capital.

 

It's the lowest the currency has traded this year in Africa's most populous
country, where the central bank maintains an official exchange rate that is
tightly controlled and it seems the worse is yet to come for the local
currency with officials having run out of ideas.

 

The naira was trading at 417.72 as of 8.51 a.m Wednesday in the authorized
market, where supplies are low. The parallel market thrives on the shortages
in the official version, resulting in the 44% gap between rates.

 

Read also: Banks' naira card limits fuel dollar demand at black market

 

There is huge demand for dollars in cash from politicians competing for
support from delegates in the party primaries, Mohammed said by phone.
"Demand is not going to abate soon, which means more pressure for the naira,
and also because dollar supply is very low," he said.

 

Nigeria's two major political parties, the ruling All Progressives Congress
and main opposition Peoples Democratic Party, plan to hold primary elections
for legislative, governorship and presidential candidates from the weekend
to early June. Some candidates give dollars to delegates as an incentive to
get their votes.

 

Nigeria's central bank could be forced to devalue the naira if it continues
to weaken in the parallel market. It has done so with the currency three
times since March 2020 in a bid to curb demand and close the gap between the
official and unauthorized rate.

 

The central bank should improve supply of the greenback rather than suppress
demand, Aminu Gwadabe, president of the Association of Bureau de change
Operators of Nigeria, said by phone. There is a "lack of confidence in the
local currency" Gwadabe said.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

Global Markets

 

Dollar out of control, crosses Rs200 in open market

KARACHI: The Pakistani rupee surpassed the anticipated level of Rs200 in the
open market against the US dollar after shedding Rs2.5 on Wednesday.

 

Meanwhile, in the interbank market, the local currency continued to be on a
slippery slope, and with a fresh decline of Rs3.87, or 1.34% in a single
day, it plunged to yet another historic low of Rs198.39 against the
greenback despite suspected intervention from the central bank.

 

The rupee was trading at a new all-time low at Rs199 at 2:46pm against the
greenback during intraday trade, compared to Tuesday's close of Rs195.74.

 

The domestic currency has maintained the downturn on the ninth consecutive
working day as it cumulatively lost 6.83% or Rs12.7. The currency hit a
record low of Rs188.66 on April 10. It then plunged to Rs190.90 on April 11,
fell over Rs192 on April 12, reached Rs193.10 on April 13, sank below Rs194
on April 16 and down to Rs196 yesterday (April 17).

 

 

The recent decline came as Pakistan resumes talks with the International
Monetary Fund (IMF) in Doha today for the revival of the stalled
multibillion-dollar loan programme.

 

Investors are concerned as there is speculation in the market that the IMF
may not agree to resume the loan programme following the government's
reluctance to implement the prerequisite conditions.

 

The market is also waiting for the outcome of the meetings held between
Prime Minister Shehbaz Sharif and his coalition partners.

 

Analysts believe the rupee is gradually heading towards exceeding the
Rs200-mark in the interbank market in the days to come if the government
doesn't take immediate action to bring economic and political stability to
the country.

 

Since the beginning of this fiscal year (July 1, 2021) to date, the rupee
has collectively dropped by a massive 25.92% (or Rs40.85) compared to the
previous fiscal year's close at Rs157.54.

 

The rupee has maintained a downward trend for the last 13 months. It has
lost 30.28% (or Rs46.12) to date, compared to the record high of Rs152.27
recorded in May 2021.

 

A day earlier, speaking to Geo.tv, AA Commodities Director Adnan Agar said:
"The situation is likely to remain uncertain for the local currency."

 

"If the government decides to remove subsidies on petroleum products, the
rupee will bounce back," he had said, adding that the local unit will remain
within the range of 180-185.

 

Agar, however, had mentioned that if the government decided to dissolve the
assembly and move towards an early election, the situation for the already
tumbling currency market would deteriorate.

 

Regarding the IMF talks, the analyst said that if the government announces
early polls, the IMF programme will be stalled or if the government decided
to maintain the subsidy on petroleum products against the IMF conditions,
the currency will slump further.

 

Agar maintained that even if the currency appreciates in the near run on the
back of the decision taken by the coalition government, by the end of the
fiscal year 2022-23 the rupee will slowly and gradually crawl back to the
current levels because of the widening current account deficit, which is one
of the major issues of Pakistan.

 

Sharing similar views, other currency dealers said that the government's
reluctance to withdraw the subsidies as agreed with the IMF has worsened the
situation.

 

Since the PTI-led government was ousted through a vote of no-confidence on
April 10, the dollar was valued at Rs182.93. From then onwards, the rupee
has lost Rs15.46 or 8.45% of its value.

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

 

Commodities Markets



 

U.S. dollar will keep gold price under pressure - VanEcK's Foster and
Casanova

(Kitco News) - The gold market remains in its long-term bull market, but the
rally in the U.S. dollar is keeping a lid on prices in what should be a
perfect environment, according to the precious metals team at VanEck.

 

In their latest precious metals report, Joe Foster, portfolio manager and
strategist, and Imaru Casanova, deputy portfolio manager for the investment
firm's VanEck International Investors Gold Fund (INIVX), said that the
strength in the U.S. dollar is what sets the current gold market bull rally
from previous years.

 

While the strategists remain long-term gold bulls, they said the precious
metal could continue to struggle as the U.S. dollar trades around its
highest level in 20 years.

 

The U.S. dollar index is currently trading at 103 points; meanwhile, gold
prices remain trapped at around $1,800 an ounce.

 

"Gold is again serving its historic role as a financial safe haven and store
of wealth. However, many gold advocates wonder why the gold price isn't
higher, given all that has transpired," the portfolio managers said in the
report. "While gold and the U.S. dollar sometimes trend higher together in
periods of acute financial stress, the normal relationship is inverse. We
believe the firm U.S. dollar has muted gold's advance in the current bull
market."

 

The widening gap in global monetary policy, with the Federal Reserve leading
the charge on interest rate hikes, is supporting the U.S. dollar's current
rally. There are growing expectations that the Federal Reserve will raise
interest rates by 50-basis points at the next three monetary policy
meetings.

 

Gold, silver look cheap as Fed rate hikes create threat of a recession -
Degussa

While the U.S. dollar continues to weigh on the gold market, Foster and
Casanova said that this environment poses significant risks for the global
economy, which could end up supporting the precious metal.

 

"Aside from a potential debt mess, inflation and rising rates could bring a
host of unintended consequences or 'black swans.' The first might come from
Japan, which has the highest debt/GDP ratio in the developed world. Because
of this, the Japanese financial system cannot tolerate higher rates," the
strategists said. "Other countries might feel the sting of a rising U.S.
dollar, too. According to the Bank for International Settlements, U.S.
dollar debts owed by borrowers outside the U.S. totaled $13 trillion as of
the last year's third quarter. These debts become more expensive in local
currencies as the dollar appreciates."

 

Along with growing economic risks from surging momentum in the U.S. dollar,
VanEck is also bullish on gold as they expect inflation to keep real
interest rates low. The strategist said that the last time inflation
spiraled out of control in the 1970s and '80s, the U.S. central bank had to
raise interest rates to double the inflation rate.

 

"Today, the fed funds rate is 0.025% - 0.050%, while Core PCE is at 5.2%.
This suggests a Fed Funds rate of 10% is in order, a rate that would likely
devastate the U.S. economy," the strategists said. "Many of the drivers of
inflation may have begun as exogenous shocks, but now represent structural
changes in the economy."

 

 

Oil falls 2.5% as U.S. refiners ramp up output, equities retreat

(Reuters) - Oil prices fell 2.5% on Wednesday, reversing early gains as
traders grew less worried about a supply crunch after government data showed
U.S. refiners ramped up output, and as crude futures followed Wall Street
lower.

 

Brent crude futures for July settled down $2.82, or 2.5%, at $109.11 a
barrel. U.S. West Texas Intermediate (WTI) crude for June fell $2.81, or
2.5%, to $109.59 a barrel.

 

Both benchmarks gave up early gains of $2-$3 a barrel following a change in
risk sentiment as equity markets fell, said UBS analyst Giovanni Staunovo.

 

U.S. crude inventories (USOILC=ECI) fell by 3.4 million barrels last week,
government data showed, an unexpected drawdown, as refiners ramped up output
in response to tight product inventories and near-record exports that have
forced U.S. diesel and gasoline prices to record levels.

 

U.S. gasoline prices fell 5%, two days after touching a record high.

 

Capacity use on both the East Coast and Gulf Coast was above 95%, putting
those refineries close to their highest possible running rates.

 

"While on the face of it, the report was extraordinarily bullish, they
(refiners) are racing to put more refined product on the market... there's
obviously a refiners response," said John Kilduff, a partner at Again
Capital LLC.

 

The dollar strengthened and global stocks retreated on concerns about
economic growth and rising inflation. read more

 

Bearish sentiment also followed reports that the United States is planning
to relax sanctions against Venezuela and allow Chevron Corp (CVX.N) to
negotiate oil licenses with state producer PDVSA. read more

 

"The perception that we could see some more supply coming Venezuela coming
into the market, along with the equity markets, it's causing some profit
taking in a much-needed technical correction in the crude," said Dennis
Kissler, senior vice president for trading at BOK Financial.

 

The European Union's failure to persuade Hungary to lift its veto on a
proposed embargo on Russian oil was adding price pressure, although some
diplomats expect agreement on a phased ban at a summit at the end of May.
read more

 

Ongoing supply concerns remained supportive. Russian crude output in April
fell by nearly 9% from the previous month, an internal OPEC+ report showed
on Tuesday, as Western sanctions on Moscow curbed exports. read more

 

On the demand side, hopes of further lockdown easing in China boosted
expectations of a recovery. Authorities allowed 864 of Shanghai's financial
institutions to resume work, sources said, and China has relaxed some COVID
test rules for U.S. and other travelers. read more

 

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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DISCLAIMER: This report has been prepared by Bulls 'n Bears, a division of
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