Bulls n Bears Daily Market Commentary : 17 October 2022

Tue Oct 18 07:21:07 CAT 2022

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Bulls n Bears Daily Market Commentary : 17 October 2022

ZSE commentary

ZSE commences new week in modest gains.

The market commenced the new week in the positive as all the four benchmarks
that we track closed pointing northwards. The primary All Share Index put on
0.47% to 13897.26pts while, the ZSE Top Ten Index extended 0.49% to end at
8262.25pts. The ZSE Agriculture Index and the Mid Cap Index added 0.45% and
0.44% to close at  70.29pts and 30044.06pts apiece. Financial services group
ZB headlined the winners of the day on a 15.00% charge to $80.5000.
Following was Dairibord that jumped 9.20% to $32.0000 as a scanty 200 shares
were traded. Fast foods group Simbisa edged up 5.00% to $180.0000 while, TSL
improved 3.96% to end pegged at $38.7753. Telecoms giant Econet fastened the
top five risers' pack after gaining 3.35% to $89.8103. Leading the weaklings
of the day was packaging group Nampak that succumbed 5.86% to $8.9000.
Construction group Masimba shed 2.57% to trade at $70.8000 as banking group
First Capital trimmed 1.62% to $9.5314 as it extended prior session's
losses. Lone miner on the bourse, RioZim slipped 1.52% to $130.0000 as top
capitalised stock Delta capped the top five fallers of the day on a 1.20%
retreat to $224.2478 having traded a low of $220.0000.

Activity aggregates were depressed in the session witnessed by volumes that
dropped 25.46% to 2m shares while, turnover fell 23.42% to $151.19m. Top
volume drivers of the day were Star Africa, Econet and Delta that claimed a
combined 72.71% of the aggregate. The duo of Delta and Econet anchored the
value outturn of the day as they claimed 35.89% and 32.57% apiece. The
Datvest MCS and the Old Mutual ETFs ticked up 0.66% and 0.49% to close at
respective prices of $1.7215 and $5.2335. Morgan and Co MIZ slid 2.72% to
$1.1674. A total of 115,746 units worth $366,127.71 exchanged hands. On the
VFEX, Bindura hopped 1.67% to USD$0.0305 on 77,237 shares while, SeedCo
International was stable at USD$0.3800 as 1.05m shares traded.
-efesecurities

Global Currencies & Equity Markets

South Africa

South African rand firms against softer dollar

(Reuters) - South Africa's rand firms in early trade on Monday as the U.S.
dollar weakened.

The rand ZAR=D3 traded at 18.1975 against the dollar by 0718 GMT, 0.87%
stronger than its previous close.

The dollar index =USD, which measures the U.S. currency against six rivals,
was down about 0.1% at 112.96.

"Global financial markets remain at the mercy of the Fed," ETM Analytics
economists said in a note, referring to the U.S. central bank, adding that
overall sentiment is cautious owing to uncertainty over longer-term Fed
policy.

On the stock market, the Top-40 .JTOPI and broader all-share .JALSH index
opened slightly higher in early trade.

The government's benchmark 2030 bond ZAR2030= was little changed in early
deals, with the yield down 1 basis point at 10.810%.

Nigeria

Inflation hits 20.7% as weak naira stokes prices

Nigeria's headline inflation rate accelerated for the eighth consecutive
month in September to 20.77 percent as weak naira stoked a fresh spike in
prices, according to the National Bureau of Statistics (NBS).

The NBS said Monday that the inflation rate, which is at a 17-year high, was
4.14 percent higher when compared to the 16.63 percent recorded in September
2021 on a year-on-year basis and 0.25 percent higher than the 20.5 percent
recorded in August 2022.

It attributed the increase in inflation to the increase in import cost due
to the persistent currency depreciation, the disruption in the supply of
food products, and the general increase in production cost.

Since the outbreak of the COVID-19 pandemic, Nigeria, which depends largely
on crude oil proceeds, has been grappling with weak foreign inflows,
resulting in a liquidity challenge in the country's foreign exchange market.

The Russia-Ukraine war, which started on February 24, has worsened the FX
challenges facing Africa's biggest economy. As of Monday, the naira-dollar
exchange rate closed at N440/$1 at the official market, compared to N370/$1
in 2020.

At the parallel market, it closed at N740/$1 on Monday, compared to N368/$1
in 2020.

Nigeria depends heavily on imports for almost everything, and this has
continued to put pressure on the country's exchange rate as importers need
dollars to import.

"We note that FX illiquidity will persist as foreign exchange inflows remain
constrained by the dwindling crude oil production since crude oil
constitutes 80 percent of the nation's forex earnings," analysts at CSL said
in a note on Monday.

"More so, the persistent illiquidity coupled with the 118 percent debt
service to revenue are disincentives to foreign capital inflows."

The country spent $14.5 billion on imports in the first six months of this
year, up from $10.04 billion in the same period of 2021, according to the
Central Bank of Nigeria's data on sectoral utilisation for transactions
valid for forex.

"We still do not grow enough to feed our fast-rising population; so we still
need to import to augment the shortfall," said Victor Olowe, a professor and
agronomist at the Institute of Food Security, Environmental Resources and
Agricultural Research.

"We need to address issues of insecurity in the country to produce more of
the crops we have a comparative advantage, so our food trade balance can be
surplus and not the deficit we have currently," Olowe said.

The NBS said food inflation also accelerated for the seventh straight month
by 23.34 percent, caused by increases in prices of bread and cereals, food
products, potatoes, yam, and other tubers, as well as oil and fats.

Analysts say the headline inflation and food inflation would go even higher
next month as floods have ravaged farmlands in key agricultural-producing
states.

The floods, which have destroyed 70,566 hectares of farmland, damaged 45,249
houses and displaced over 1.4 million Nigerians with about 500 persons
reported dead, according to the Ministry of Humanitarian Affairs, have sent
prices of key food items on an upward trajectory, especially in communities
affected by the floods.

"The ongoing flooding has added to the problems of the food system, thus
reducing food availability," Kabiru Ibrahim, national president of the All
Farmers Association of Nigeria, told BusinessDay.

"We are going to see another surge in food prices and hunger as we currently
do not have anything in our reserves that would have served as a buffer to
cushion the effect that would come from the shortfall," he said.

Core inflation, which excludes the prices of volatile agricultural produce,
stood at 17.60 percent in September 2022 on a year-on-year basis, up by 3.86
percent when compared to the 13.74 percent recorded in September 2021.

Analysts at London-based Capital Economics said the rise in Nigeria's
headline inflation rate to a 17-year high of 20.8 percent year-on-year last
month reinforced their view that policymakers would raise the benchmark
interest rate by a further 100 basis points to 16.50 percent in November.

"Looking ahead, we expect inflation to remain around these rates for a few
months before falling back - and there are large upside risks. Recent
flooding could prevent food inflation from dropping back," they said in a
report.

 <mailto:info at bulls.co.zw> 

Global Markets

Dollar dips as UK budget U-turn improves market sentiment

(Reuters) - The dollar dipped against a basket of major currencies and
sterling jumped on Monday after Britain's new finance minister ditched most
of the government's "mini-budget", while better than expected earnings from
Bank of America helped to boost risk appetite.

Investors are also focused on whether the Bank of Japan would intervene as
the Japanese currency falls to its weakest level against the dollar in 32
years.

Jeremy Hunt, who was appointed finance minister by Prime Minister Liz Truss
on Friday, reversed swathes of the 45-billion pound "mini-budget" that
sparked market turmoil in which the pound hit record lows and the Bank of
England was forced to intervene.

"The pound has been the driver of the FX market this month so far, and the
big change the UK government has announced has restored faith in the pound
and taken the bid on the U.S. dollar out," said Adam Button, chief currency
analyst at ForexLive.

British gilts rallied sharply after the news. Hunt replaced Kwasi Kwarteng,
whose package of unfunded tax cuts on Sept. 23 unleashed a bond market
sell-off.

"For now, the market seems happy to give the new chancellor time and space
to put the government's house back in order," said Chris Beauchamp, chief
market analyst at IG.

Sterling was last up 1.54% at $1.1348, after earlier reaching $1.1440, the
highest since October 5.

Marc Chandler, chief market strategist at Bannockburn Global Forex, says its
likely that the pound bottomed at the record low of $1.0327 reached on
September 26, which he called "an exaggeration."

The next major resistance level for the British currency is $1.15, he added.

Risk sentiment also improved after Bank of America reported a
smaller-than-expected drop in quarterly profit and said that its U.S.
consumer client spending remained strong, even if it was slowing.

The dollar index against a basket of currencies fell 0.82% to 112.11. It is
holding just below a 20-year high of 114.78 hit on September 28.

The Federal Reserve's rapid interest rate increases have contributed to the
strength of the dollar, but that may ease once the U.S. central bank reaches
the point of pausing the hikes, St. Louis Fed President James Bullard said
on Saturday. read more

The euro gained 1.19% against the greenback to $0.9838, the highest since
October 6.

Traders are also on watch for any intervention from the Bank of Japan after
the yen fell to a 32-year low of 148.97.

Japan last month intervened to buy the yen for the first time since 1998,
after the Bank of Japan stuck to its policy of maintaining ultra-low
interest rates, which has battered the currency this year.

Japanese authorities kept up their warnings to the market on Monday of a
firm response to overly rapid yen declines, after last week's fall and
meetings of global financial leaders that acknowledged currency volatility.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold price rebounds as dollar, yields pull back

Gold halted its slide on Monday, helped by a slight pullback in the US
dollar and Treasury yields, even as fears lingered about more hefty Federal
Reserve rate hikes to tame soaring inflation.

Spot gold rose 1.1% to $1,662.21 per ounce as of 10:55 a.m. ET, after
declining more than 3% last week in its worst performance since July. US
gold futures climbed 1.3% to $1,669.50 per ounce in New York.

"Gold has benefited from USD weakness today, after the pound rebounded amid
expectations that more of the tax cuts will be reversed," Bank of China
International analyst Xiao Fu told Reuters.

"Meanwhile, US Treasury yields moved lower. But with the US CPI remaining at
elevated levels, the Fed could hike rates by another 75 basis points in
early November and do further hikes in December. These could reintroduce
macro headwinds for gold," Fu added.

St. Louis Fed President James Bullard previously said that the latest CPI
data warrants continued "frontloading" through larger rate hikes of
three-quarters of a percentage point, but that does not necessarily mean
rates need to be raised above the central bank's projections.

Gold prices have fallen 20% since scaling above the key $2,000 per-ounce
level in March as rapid Fed rate hikes weighed on bullion's appeal.

"In this environment where central banks are more focused on the size of any
rate hikes rather than whether to raise interest rates at all, it is hard
for gold to find any significant support," said Rupert Rowling, a market
analyst at Kinesis Money.

(With files from Reuters)

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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