Bulls n Bears Daily Market Commentary : 26 September 2022

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Bulls n Bears Daily Market Commentary : 26 September 2022

 

 	

 

 

 	


ZSE commentary

 

All-Share rebounds past 12,000pts mark.

The market continued to advance in new week as heavy cap stocks sustained
the surge. The mainstream All Share Index recovered past the 12000pts mark
after putting on 8.88% to end the day at 12584.17pts. The Blue-Chip Index
garnered 11.26% to 7415.12pts while, the ZSE Agriculture Index added 3.39%
to 68.75pts. The Mid-Cap Index rose 4.28% to close at 27576.97pts. Leading
the gainer's pack for the second consecutive session was BAT that extended
15.00% to $2,380.5000, trailed by beverages group Delta that jumped 14.99%
to $194.5000. Conglomerate Innscor soared 14.98% to end pegged at $234.1500.
SeedCo Limited and Econet Wireless gained an identical 14.97% to close at
respective prices of $88.3000 and $89.8500.

 

On the downside was TSL that dipped 7.53% to $40.5000 followed by banking
group CBZ that trimmed 5.90% to $137.2000. Zimplow slipped 4.51% to $14.0364
while, Turnall shed 0.15% to $3.3150. Completing the top five laggards of
the day was Star Africa which slumped 0.12% to $1.5962. Activity aggregates
were mixed in Monday's session as reflected in volumes that edged up 85.57%
to 1.72m while, turnover tripped 22.25% to 35.41m. Volume drivers of the day
were African Sun, Star Africa and Edgars that claimed 28.86%, 18.83% and
16.29% individually. Anchoring the value aggregate was African Sun, Masimba,
OKZIM and Proplastics with a combined outturn of 60.18%. VFEX recorded no
trades in the session. The three ETFs were active in the session as Old
Mutual topped the list on a 11.42% lift to $4.7014. MIZ and Datvest went up
4.00% and 2.96% to settle at respective prices of $1.3000 and $1.4971.
Elsewhere, Simbisa released its FY22 results in which revenue jumped 76% to
$72.92bn and declared a final dividend of USD$0.0058.efesecurities

 

 

 <mailto:info at bulls.co.zw> 

 

Global Currencies & Equity Markets

 

 

South Africa

 

South African rand slumps to 28-mth low as dollar reigns supreme

(Reuters) - South Africa's rand slumped to a 28-month low on Monday,
tracking other weakening emerging market currencies as safe-haven U.S.
dollar continued its ascendancy against a basket of major peers.

 

At 1602 GMT, the risk-sensitive rand traded at 18.1000 against the dollar,
0.74% weaker than its previous close. It hit 18.1150 earlier in the day, its
lowest since May 2020.

 

The dollar index , helped by the British pound's decline and a fresh 20-year
low for the euro, was last up 0.84% at 114.080. read more

 

 

Like most emerging market currencies, the rand is highly susceptible to
global drivers such as the U.S. monetary policy.

 

"The increase in the hawkish tone of the FOMC last week caused risk assets
to weaken further, including EM currencies, and so (did) the rand as markets
factor in a higher U.S. interest rate trajectory, for longer, in the face of
crumbling global growth," Investec analyst Annabel Bishop wrote in a
research note.

 

 

Shares on the Johannesburg Stock Exchange rose, boosted by tech and consumer
discretionary stocks, recovering from steep falls triggered by the South
African Reserve Bank's (SARB) interest rate hike.

 

The SARB delivered another big rate hike last week, following other central
banks, taking its main lending rate close to pre-COVID levels. This sent
major stock indexes, especially consumer-oriented ones, tumbling as the hike
added to the high cost of living.

 

 

South Africa's largest food producer Tiger Brands (TBSJ.J) led the gainers
on Monday, ending 10.43% higher after reporting it expected annual profits
to rise despite recall costs.

 

Overall on the stock market, the Top-40 (.JTOPI) and the broader all-share
(.JALSH) indexes both closed up over 0.3%.

 

The government's benchmark 2030 bond fell, with the yield up 10.5 basis
points to 10.875%.

 

The Thomson Reuters Trust Principles.

 

 

 

 

Nigeria

 

Naira under pressure as MPC decides on rate today

Nigeria's embattled naira and the persistent rise in inflation will weigh
heavily on the interest rate decision of the Monetary Policy Committee (MPC)
meeting today in Abuja.

 

The naira touched a new low in both the official and parallel markets on
Monday. While the currency crashed to N722 per dollar in the more-accessible
parallel market, it slumped to N436 per dollar in the official market.

 

The depreciation of the naira followed rising demand for dollars for
Business Travel Allowance, Personal Travel Allowance, and school fees by the
end-users amid scarcity of the greenback.

 

"The MPC urgently needs to address the naira's downward spiral with
appropriate policy interventions to improve exports, harmonise rates and
promote import substitution," said Taiwo Oyedele, head of tax and corporate
advisory services at PwC Nigeria.

 

The naira has now weakened by 21.74 percent against the dollar in the
parallel market since the beginning of the year, compared with a 3.9 percent
decline in the official market.

 

The sharp decline in the exchange rate has hurt manufacturers and small
businesses that rely on imports. Some analysts are of the view that the
Central Bank of Nigeria (CBN) may hike interest rates further as a way to
lure foreign inflows into the country and ease the pressure on the naira.

 

Accelerating inflation is also seen influencing the decision of the MPC,
with analysts polled by BusinessDay expecting further tightening of the
monetary policy stance.

 

Godwin Emefiele, governor of the CBN, had said recently that the apex bank
would continue to tighten its monetary policy stance if the rising inflation
persisted.

 

"There is a high probability that the MPC will again raise interest rate by
say 50 basis points to fight inflation, more so that the latest GDP growth
rate shows improvement," Ayodele Akinwumi, an analyst at FSDH Merchant Bank,
said.

 

Nigeria's headline inflation accelerated to the highest level in 17 years to
20.52 percent in August 2022, from 19.64 percent in the previous month.

 

Oyedele noted that the MPC has raised the benchmark interest rate by a
combined 250 basis points just in the past few months.

 

He said: "However, this has not been able to slow down inflation essentially
because the current inflation is, to a large extent, not due to excess money
supply.

 

"Most of the existing policy responses focus on the demand side and not
enough focus on the supply side. This creates market distortion which
further discourages forex supply."

 

Jerome Powell, chair of the US Federal Reserve, on September 21, 2022,
announced a third consecutive "jumbo" 0.75 percentage point rate hike to
rein in inflation.

 

The Fed's decision to increase interest rate is to curb the rising
inflation, which is at a 40-year high.

 

The consumers' actions to the rising interest rate will cause the economy to
cool off and to enter into a recession, according to Ayodele Akinwunmi,
relationship manager, corporate banking at FSDH Merchant Bank Limited.

 

"There is a high probability that the MPC will again raise the interest rate
this week by say 0.5 percent also to fight inflation, more so that the
latest GDP growth rate shows improvement," he said.

 

Patrick Njoroge, Kenya's Central Bank, said Fed's decision may push the
global economy into recession.

 

Read also: Naira's gap with official rate widens to most since 2016

 

The CBN had on July 19, 2022 tightened its benchmark interest rate by 100
basis points to 14 percent, the second straight raise this year to curtail
rising inflation.

 

"The CBN has hiked rates twice in the last two MPC meetings. Yet,
inflationary pressure has not abated. If anything, it has intensified.
Evidently, our inflationary conditions are not credit driven," said Muda
Yusuf, CEO/founder of Centre for the Promotion of Private Enterprise.

 

According to him, private sector credit as a percentage of GDP is just about
12 percent, one of the lowest in the world.

 

He said: "This ratio is over 120 percent in South Africa, and over 200
percent in the USA. It shows the degree to which the banking sector is
disconnected from the economy. We cannot have a tightening policy in an
economy grappling with fragile growth and high unemployment.

 

"The credit conditions are already very tight. Cash Reserve Requirement
(CRR) is at 27.5 percent, one of the highest globally. Effective CRR for
some banks is about 50 percent or even more. Liquidity ratio is 30 percent.
MPR is 14 percent. These restraining thresholds are already on the high
side. Financial intermediation is already being considerably impeded."

 

Yusuf was concerned that investors with credit exposure to the banks were
already groaning over hike in interest rates on the back of the increases in
MPR over the last two MPC meetings.

 

"This is of course in addition to the cost pressures driven by the forex
crisis and the soaring energy cost. It will not be in the interest of the
economy for the CBN to hike rates at its next MPC meeting," he said.

 

Bismarck Rewane, managing director/chief executive officer of Financial
Derivatives Company Limited, said the CBN is likely to allow an adjustment
at the I&E window towards N440/$, adding that it would increase forex supply
at the window.

 

 

 

 

 

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

Global Markets

 

 

British pound falls to all-time low against dollar after taxes slashed

The British pound hit an all-time low against the U.S. dollar on Sept. 26
following the new government's move to enact sweeping tax cuts.  

 

Fresh turmoil swept global financial markets on Monday, as investors
rejected the British government's bet on a risky economic strategy, sending
the pound to an all-time low against the surging dollar and prompting the
Bank of England to issue an unusual statement of reassurance.

 

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Russia's war in Ukraine.

The three major U.S. stock indexes fell, with the Dow Jones industrial
average losing more than 1 percent and sinking into a new bear market. So
far this year, the Dow has lost more than 20 percent of its value.

 

Tumult in the U.K., by itself, is unlikely to push the weakening global
economy into a recession, economists said. But the reaction to events in
London reflects the fragility of investor sentiment amid pandemic, war and
historic inflation.

 

"The global economy is very far out of equilibrium. So when you get a shock,
the ramifications are much greater than they would be otherwise," said Eric
Winograd, senior economist with AllianceBernstein in New York. "A stiff gust
of wind can blow the whole thing over."

 

 

Monday's upheaval was triggered by investor fears that British Prime
Minister Liz Truss's proposal to increase government borrowing to pay for
tax cuts will worsen inflation, which is already near 10 percent. Market
reaction to the U.K. growth plan released on Friday - which some analysts
likened to President Ronald Reagan's 1980s approach - has been seismic.
Since Thursday, the yield or interest rate on the British government's
five-year bond has jumped by a full percentage point, an enormous move by
bond market standards.

 

The U.K.'s crisis is largely homegrown, as a new Conservative government
grapples with the economic fallout from the pandemic, rising energy costs
and the lingering effects of the country's withdrawal from the European
Union. But the continuing swings in stock and bond values on both sides of
the Atlantic are the latest sign that the Federal Reserve and other central
banks have unleashed a fundamental change in the global financial climate by
sharply raising interest rates.

 

Central banks in almost every major economy are tightening credit in hopes
of cooling pricing pressures. Those higher rates are roiling currency
markets and forcing investors to reassess the value of stocks and bonds that
they purchased assuming interest rates would remain near zero.

 

 

"The global environment is now very, very different," said Neil Shearing,
global chief economist for Capital Economics in London.

 

Five Fed rate hikes since March have lifted short-term interest rates by
three percentage points, drawing foreign investors to the dollar. The
greenback is up more than 19 percent against a basket of foreign currencies
so far this year, which should help reduce U.S. inflation by making imported
products more affordable. But at the same time, the stronger dollar is
causing problems for U.S. trading partners.

 

Global economy weakening amid inflation fight, war and lingering pandemic

 

In the U.K., the pound fell early Monday to an all-time low of $1.03. The
Bank of England, which raised its benchmark interest rate the day before the
government issued its new stimulus proposal, resisted calls on Monday for a
further emergency increase. Instead, the Bank of England issued a bland
statement, saying it was "monitoring developments in financial markets very
closely in light of the significant re-pricing of financial assets."

 

 

The bank said it would make "a full assessment" of the government's plan at
its November meeting and would "not hesitate to change interest rates by as
much as needed" to control inflation.

 

On Monday, the People's Bank of China said it would make it harder for
traders to speculate on the yuan's continued decline against the dollar. The
Chinese currency is approaching its lowest point against the dollar since
the 2008 financial crisis.

 

Dollar strength also prompted the Japanese government last week to intervene
in foreign exchange markets for the first time since 1998 to support the
yen.

 

Developing countries that borrowed dollars from global banks face higher
repayment costs as their currencies sink in value. Likewise, the dollar's
primacy in global energy markets means heavy importers of oil are watching
their bills tick higher.

 

 

The U.K. episode comes as investors continue digesting the latest Fed rate
hikes while bracing for similar moves this week by central banks in Mexico,
Colombia, Thailand, Hungary and Nigeria. Bondholders worry that the Fed will
need to raise rates much higher to defeat inflation, thus eroding the value
of existing securities. And stock market investors fear that same aggressive
monetary tightening will eat into corporate profits and send shares
tumbling.

 

"The proposal has really increased uncertainty and really caused people to
question what the trajectory of the economy is going to be," Raphael Bostic,
president of the Federal Reserve Bank of Atlanta, said in a Washington Post
Live interview.

 

The pound's slide works to the benefit of American tourists, as it allows
their dollars to go further. But it is anxiety-producing for British
households, which were already contending with soaring energy bills and
rampant inflation. They may soon confront higher costs for imported goods
and services, including fuel, vehicles and food.

 

Who is Liz Truss, the U.K.'s new prime minister?

 

Though Truss had pledged tax cuts during her leadership campaign, the scale
of the cuts still shocked many economic observers. "In the current economic
environment it is a huge gamble," wrote Thomas Pope, an economist with the
Institute for Government.

 

 

On Friday, Kwasi Kwarteng, the new chancellor of the exchequer, or finance
minister, announced a package of cuts worth 45 billion pounds ($48 billion)
- amounting to the biggest shake-up to the British tax system in 50 years.

 

It is also a major shift from the policies of Truss's predecessor, fellow
Conservative Party member Boris Johnson, who last year announced tax
increases to help cover the costs of the coronavirus pandemic.

 

Under Truss, the government has slashed the top income tax rate of 45
percent for those making more than 150,000 pounds ($160,000) a year and
scrapped the cap for banker bonuses - moves that will predominantly help
more-affluent citizens in hopes that they will increase their spending.

 

In a broader-reaching measure, the government will cap energy bills starting
in October - at a cost of 60 billion pounds for six months.

 

 

European governments are eyeing similar programs to insulate consumers from
higher energy bills. But instead of borrowing money to fund the new
spending, they are mulling tax increases on some energy producers. "The U.K.
is very much an outlier," Winograd said.

 

Investors say the British government's tax-and-borrow plan is ill-designed
and self-defeating. Pumping more borrowed money into the economy with
inflation already near 10 percent will only cause prices to rise faster,
they said.

 

Plus, the U.K. needs to attract foreign money to finance its trade and
budget deficits. In the first quarter of the year, the U.K. ran an 8.3
percent current account deficit, the widest measure of the country's trade
performance, while the government also spent much more than its tax revenue.

 

"The market thinks they have unsustainable twin deficits," said Marc
Chandler, managing director for Bannockburn Global Forex. "And what it takes
to get the foreign money to finance them is higher rates and weaker
sterling."

 

 

The pound's drop comes about two months after the euro reached parity with
the dollar for the first time in nearly two decades. The euro had been
losing ground all year in part because of economic upheaval from the war in
Ukraine that has disrupted food supplies and sent energy costs soaring
around the world, especially in Europe.

 

Mike Riddell, a senior fixed-income portfolio manager at Allianz Global
Investors, said the weakening pound is not "necessarily a symptom of
European recession." Rather, investors are starting to become skeptical of
Britain's ability to fight inflation.

 

"The scary thing is that the global economy is yet to feel the impact of all
the rates hikes we've seen around the world in the last few months, because
it takes about a year for monetary policy changes to have an impact on the
economy," he said in an email.

 

In many cases, a weaker currency may be advantageous, for example, in making
British exports cheaper for consumers in the United States - and so a weak
pound will boost overseas sales for companies that are export-oriented. But
it means anything denominated in dollars, such as energy costs, will soar
for consumers.

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

 

Commodities Markets



 

Yellow metal gains some strength; silver remains below Rs 56,000

NEW DELHI: Gold prices moved marginally higher on Tuesday as the US dollar
took a breather. That said, despite the rise, it languished near
two-and-a-half-year lows amid rate hikes fears.

 

The US Federal Reserve officials on Monday sloughed off rising volatility in
global markets and said their priority remained controlling inflation.

 

Gold futures on MCX were trading marginally higher by 0.14% or Rs 70 at Rs
49,220 per 10 grams. However, silver futures were flat, up by merely 0.09%
or Rs 51 at Rs 55,403 per kg.

 

Gold prices have declined more than 20% since rising above the key $2,000
level in March, as rapid US rate hikes made the non-yielding bullion less
attractive and also pushed the dollar to multi-year highs.

 

Gold is considered an inflation hedge, rising interest rates increase the
opportunity cost of holding the non-yielding asset and bolsters the dollar,
in which the bullion is priced.

 

Russian President Vladimir Putin's move to mobilise more troops over the
conflict in Ukraine drew investors to the safe-haven asset, said ICICIDirect
Research.

 

"Bullion prices were supported as an interest rate hike by the US Fed raised
fears over a possible recession," it added. "However, a steep rise in the US
dollar index and US 10 year's treasury yields restricted upside."

 

Gold premiums in top consumer China climbed last week, helped by strong
demand for bullion, while prices in India traded at a discount for the first
time in four weeks due to an uptick in domestic rates.

 

In the spot market, the highest purity gold was sold at Rs 49,590 per 10
grams while silver was priced at Rs 55,374 per kg on Monday, according to
the Indian Bullion and Jewellers Association.

 

The spot prices of gold have plunged almost Rs 1,300 per 10 grams in the
last two weeks, whereas silver has plunged about 1,900 per kg in almost the
same period under review.

 

"Strength in the US dollar and treasury yields is making the non-yielding
asset less attractive. Higher interest rates dull bullion's appeal since the
metal yields no interest," said Ravi Singh, Vice President and Head of
Research, ShareIndia.

 

Gold may remain sideways to down till some fresh trigger moves the prices
upward, he added.

 

Global markets

Spot gold was up 0.4% at $1,628.78 per ounce, as of 0315 GMT, after hitting
its lowest since April 2020 at $1,620.20 on Monday. US gold futures edged
0.2% higher to $1,636.30.

 

Spot silver rose 0.6% to $18.45 per ounce, platinum fell 0.2% to $850.46 and
palladium inched 0.1% lower to $2,044.99.

 

 

 

 

 


 

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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been compiled from sources believed to be reliable, but no representation or
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for guideline purposes only and sourced from third parties.

 

 	

 

 

 	

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