Bulls n Bears Daily Market Commentary : 06 July 2023

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Bulls n Bears Daily Market Commentary : 06 July 2023

 

 	



 

 	


ZSE commentary

 

Zimbabwe Stock Exchange (ZSE) 

 

The ZSE All Share Index added 2307.49 points (1.24%) to close at 187,657.43
points. Trading in the positive: CBZ HOLDINGS LIMITED added $400.0765 to
close at $3500.0089, CFI HOLDINGS LIMITED rose by $252.7000 to $1937.9000
and AFDIS DISTILLERS LIMITED added $245.5500 to $1882.5500. TSL LIMITED also
increased by $100.0000 to close at $800.0000 and FBC HOLDINGS LIMITED was
$70.7000 stronger at $542.1000.

 

Trading in the negative: MEIKLES LIMITED retreated by $257.1429 to
$2100.0000, DELTA CORPORATION LIMITED lost $40.4656 to $3983.9978 and ECONET
WIRELESS LIMITED  eased $31.4189 to $1052.2470. OK ZIMBABWE LIMITED shed
$7.5622 to close at $297.4683 whilst HIPPO VALLEY LIMITED lost $6.8627 to
close at $2500.0000 EXCHANGE TRADED FUNDS  MORGAN & CO MULTI SECTOR EXCHANGE
TRADED FUND remained flat at $145.0000. MORGAN & CO MADE IN ZIMBABWE
EXCHANGE TRADED FUND remained flat at $6.4000 and CASS SADDLE AGRICULTURE
EXCHANGE TRADED FUND added $0.0043 to $4.5537. DATVEST MODIFIED CONSUMER
STAPLES EXCHANGE TRADED FUND added $0.0037 to $13.0000 and OLD MUTUAL ZSE
TOP 10  increased by $6.0893 to $52.0000.

 

 

 <mailto:info at bulls.co.zw> 

 

 

Global Currencies & Equity Markets

 

South Africa

 

South African rand, stocks tumble as Fed minutes drive risk-off sentiment

(Reuters) - South Africa's rand and stocks tumbled on Thursday as the
Federal Reserve's June meeting minutes revealed a hawkish policy stance,
prompting investors to move away from riskier assets.

 

At 1500 GMT, the rand traded at 19.1000 against the dollar , almost 1.7%
weaker than its previous close and its weakest since early June.

 

The dollar last traded at 103.300 against a basket of global currencies,
around 0.4% weaker, reversing earlier gains.

 

Minutes of the Fed's June meeting, released on Wednesday, showed that a vast
majority of policymakers expected further monetary policy tightening, even
as they agreed to hold interest rates steady last month.

 

Global stocks sunk on Thursday, with the MSCI All-World index
(.MIWD00000PUS) last trading down around 0.4%.

 

"Local stocks have had a tough day today, taking their lead from global
equity markets and some risk off sentiment creeping into what are overbought
conditions," said Shaun Murison, senior market analyst at IG.

 

On the Johannesburg Stock Exchange, both the blue-chip (.JTOPI) and the
broader all-share (.JALSH) indices closed over 2% weaker.

 

South Africa's benchmark 2030 government bond was weaker, with the yield up
18.5 basis points at 10.700%.

 

-The Thomson Reuters Trust Principles.

 

 

 

Kenyan, Zambian currencies expected to weaken

 

(Reuters) - Kenya's shilling and Zambia's kwacha are forecast to weaken
against the dollar in the week to next Thursday, Uganda's currency will
strengthen, while those of Ghana and Nigeria will remain stable, traders
said.

 

KENYA

Kenya's shilling is expected to remain on the back foot in the week ahead as
persistent demand for dollars from oil importers and manufacturers weighs on
the local currency.

 

At 0814 GMT, commercial banks quoted the shilling at 140.75/95 per dollar
compared with last Thursday's close of 140.40/60. It hit 140.80/141.00
earlier in the day, a record low.

 

One trader at a commercial bank said the currency was expected to float
around 141.00 levels.

 

The east African nation secured a $500 million 3-year and 5-year syndicated
medium-term loan facility on Thursday in a much-needed boost as it has
struggled to access international capital markets after Eurobond yields
surged last year.

 

"The secured facility will be handy in the near term. What needs to be
cleared (up) is the opaqueness about our debt situation, and more
importantly what steps the government is doing on the tax front," the trader
said.

 

NIGERIA

Nigeria's naira is seen trading at current levels next week due to a
shortage of liquidity as the currency finds its market level after the
central bank's liberalisation of the exchange rate market, traders said.

 

The naira hit a weekly low of 788.5 against the dollar on Monday, near a
record low level it touched in the previous session and weaker than the
black market rate of 785 naira.

 

"The currency is expected to continue to trade at current levels of between
750 and 790 ... until we see improved FX liquidity and the central bank is
able to attract other sources of FX inflows from (foreign portfolio
investors) and international oil companies," one trader said.

 

GHANA

Ghana's cedi is expected to hold steady against the dollar next week on the
back of high foreign exchange liquidity following central bank support,
traders said.

 

Refinitiv Eikon data showed the cedi trading at 11.0000 to the dollar on
Thursday, compared with 11.1500 at last Thursday's close.

 

"The pair has traded sideways in recent sessions due to ample FX liquidity.
We expect this narrative to persist in the near term, with the cedi
continuing to hold its own against the greenback. Bid-offer spreads are also
expected to tighten further," said Sedem Dornoo, a senior trader at Absa
Bank Ghana.

 

Chris Nettey, Head of Trading Stanbic Bank Ghana, said the cedi had
appreciated marginally due to increased supply on the interbank market.

 

UGANDA

The Ugandan shilling is expected to firm in the coming week, drawing support
from hard currency inflows from exporters of commodities such as coffee.

 

At 0850 GMT, commercial banks quoted the shilling at 3,690/3,700, compared
with last Thursday's close of 3,660/3,670.

 

"Inflows from commodity exporters are quite strong, yet from the demand
side, activity is very low. I would reckon this dynamic should favour the
shilling in the short term," said an independent foreign exchange trader in
the capital Kampala.

 

ZAMBIA

Zambia's kwacha is likely to remain under pressure against the dollar next
week as demand for hard currency in the market outstrips supply.

 

On Thursday, commercial banks quoted the currency of Africa's second-largest
copper producer at 18.0400 per dollar, compared to 17.4500 at the close of
business a week ago.

 

Market players with dollar positions were holding on to hard currency in
anticipation of higher rates, Access Bank said in a note on Thursday.

 

"The kwacha is anticipated to follow a downward trend in the near term given
current market trends persist," Access Bank said.

 

-The Thomson Reuters Trust Principles. 

 

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

Global Markets

 

Dollar eases after strong labor market reports

(Reuters) - The dollar eased after a brief rebound on Thursday as data
showing the U.S. labor market remains strong increased chances the Federal
Reserve will raise interest rates later this month.

 

Private payrolls surged in June in the biggest rise since February 2022, an
ADP National Employment report showed, while the number of Americans filing
new claims for unemployment benefits rose moderately last week, the Labor
Department said.

 

Later, a survey by the Institute for Supply Management (ISM) showed the U.S.
services sector grew faster than expected in June as new orders picked up,
adding to data indicating a resilient economy in the face of tighter
monetary policy.

 

"This strong data today has a lot more of a 'good news is bad news' type
feel to it," said Brian Daingerfield, head of G10 FX strategy at NatWest
Markets in Stamford, Connecticut.

 

"Take it together with how equity markets have responded, that gives a clear
picture of the dollar today. Call it a risk-off style move, where the Fed is
going to be tightening more and that has negative repercussions for risk."

 

Futures markets raised the probability of the Fed hiking interest rates by
25 basis points to 92.4% when policymakers conclude a two-day meeting on
July 26, the CME Group's FedWatch Tool showed.

 

The yield on two-year Treasuries rose above 5% to their highest in 16 years,
while U.S. stocks tumbled on the outlook that rates will stay higher for
longer.

 

The dollar index , measuring the U.S. currency against six others including
the euro and Japan's yen, fell 0.18% to 103.13.

 

ISM showed a measure of prices paid by businesses fell to more than a
three-year low, suggesting inflation would continue to cool, but Fed
officials again signaled higher rates ahead.

 

Dallas Fed President Lorie Logan said she was very concerned "whether
inflation will return to target in a sustainable and timely way."

 

The major central banks for the most part are fine-tuning monetary policy,
and it is unclear when they will act as they alternate between hiking and
pausing interest rates, said Brad Bechtel, global head of FX at Jefferies.

 

"Given all these central banks are more or less in the same place in some
way, shape or form, the dollar's going have a hard time" moving too much one
way or the other, he said.

 

The safe-haven Japanese yen strengthened 0.39% versus the greenback at
144.09 as concerns about the global growth outlook, resulting from the
aggressive monetary tightening by major central banks, weighed on risk
appetite.

 

ONE DIMENSIONAL

The pound hit two-week highs against the euro and dollar as financial
markets bet the Bank of England will raise rates to 6.5% early next year,
pushing the yield on the two-year UK government bond to its highest since
June 2008.

 

"The FX market is taking more of a 'one-dimensional approach' to trading the
British disease," said Stephen Gallo, global FX strategist at BMO Capital
Markets.

 

"Instead of selling GBP in anticipation of an economic slowdown, it is
buying GBP on the basis of interest rate differentials," Gallo said.

 

The Chinese yuan last traded down slightly at 7.2575 per dollar in the
offshore market , a day after falling about 0.4%. The central bank set a
stronger-than-expected midpoint fixing for the fourth straight day this
week, which traders believe is an attempt to prevent the yuan from weakening
too fast and too far.

 

Bitcoin hit a 13-month high of $31,500, continuing to find support due to
recent plans by fund managers to launch a U.S.-listed spot bitcoin
exchange-traded fund (ETF).

 

Currency bid prices at 3:37 p.m. (1937 GMT)

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

 

Commodities Markets



 

 

Gold price rose by 5.4% in the first half of this year - WGC

 

The World Gold Council (WGC) reports in its 'Mid-Year Outlook 2023' report,
that gold outperformed other major assets, aside from developed market
stocks, in the first half of this year and that the gold price increased by
5.4% to $1 912/oz at the end of June.

 

"Gold not only contributed positive returns to investor portfolios, it also
helped dampen volatility throughout the first half of this year, especially
during the mini-banking crisis in March".

 

The WGC also states that a combination of factors contributed to gold's
performance.

 

This includes a relatively stable dollar and interest rates, event risk
hedging and continued central bank demand.

 

"Both the European Central Bank (ECB) and the Bank of England (BoE)
increased interest rates in June, but the US Federal Reserve kept its target
rate unchanged in order to let the effects of the tightening cycle make
their way through the real economy.

 

"US bond market participants expect an additional hike by the US Fed this
year, most likely in July, followed by a sustained 'hold' period. And while
bond markets expect the ECB and the BoE to further increase target rates,
markets anticipate the end of the cycle is near, or at least it will be by
the end of the year".

 

The WGC adds that, as monetary policy likely transitions from tightening to
on-hold, market consensus is for a mild contraction in the US this year,
along with slow growth in developed markets.

 

Should this scenario play out, the WGC's analysis suggests that gold will
remain supported this year, particularly given its robust performance in the
first half of this year.

 

"It, however, may not break out significantly from the range we have seen so
far this year."

 

The WGC finds that this gold performance is a by-product of the four key
drivers that determine gold performance, including economic expansion, risk,
opportunity cost and momentum.

 

"While slow economic growth in the West may have a negative effect on
consumer spending, we anticipate that the Indian economy will hold up better
and China will respond to potential economic stimulus later in the year,
providing some support to local demand.

 

"In addition, despite signs of cooling inflation, the combination of stock
market volatility and event risk (such as geopolitical or financial crisis)
is likely to keep hedging strategies, including gold, in place."

 

Based on market consensus expectations, the WGC states that slightly lower
interest rates and a weakening dollar will help gold by reducing its
opportunity cost for investors.

 

This is consistent with the three previous hold cycles, which have lasted
between six and twelve months. During these periods, gold had an average
monthly return of 0.7% - equivalent to an 8.4% yearly return - and above its
long-term performance.

 

"As we have discussed in the past, this generally happens because gold is
influenced by bond yields rather than actual policy rates, as the former
include market expectations of future policy decisions and the likelihood of
a subsequent recession."

 

With monetary policies so tight, the WGC stresses that investors are also
looking at association the Institute for Supply Management's Purchasing
Managers' Indexes (PMIs) as signals of future weaknesses.

 

Further, developed market PMIs - both manufacturing and services - have been
deteriorating in recent months.

 

"Our analysis shows that gold tends to outperform equities when
manufacturing PMI is below 50 and falling. Further, if PMI falls below 45,
history suggests gold's outperformance may be even more pronounced.

 

And while gold has underperformed against equities if manufacturing PMI is
below 50 but rising, it has still delivered positive returns, showcasing the
asymmetrical benefits it tends to bring to portfolios".

 

UPSIDE WITH RISKS

 

The WGC points out that, if the recision risk increases, gold investment
could see greater upside. An economic deterioration could be driven by a
significant increase in defaults following tighter credit conditions, or
other unintended consequences of the high-rate environment.

 

Historically, such periods have resulted in higher volatility, significant
stock market pullbacks and an overall appetite for high-quality, liquid
assets such as gold.

 

"On the flipside, expectations of a soft landing - where a recession is
avoided but monetary policy remains tight - could create headwinds for gold
and result in disinvestment. For example, gold exchange-traded products saw
sizable outflows in June and gold holdings have fallen year-to-date.

 

"It is worth noting, however, that given gold's positive performance in the
first half of the year, an investor unwind would need to be severe to result
in the average 2023 gold price falling below $1 800/oz, its 2022 average."

 

The WGC notes that, as investors assess the impact of restrictive monetary
policy and the possibility of a recession, "they often dial up defensive
strategies in their asset allocation".

 

"For example, a common approach is to rotate part of the equity exposure
into defensive sectors to limit losses during a significant market drawdown.

 

To illustrate this, we compare two hypothetical defensive strategies: one
where 20% of the equity allocation is invested in defensive sectors, and one
where 10% is invested in defensive sectors and 10% in gold."

 

The WGC's analysis shows that over the past 25 years, the strategy including
gold could have improved returns, while reducing volatility and drawdown.

 

Should the expected mild US contraction occur, the strong first half of the
year for gold is likely to give way to a more neutral second half of the
year, says the WGC.

 

"In this scenario, gold would draw support from a weaker dollar and stable
bond yields, although this would be met by downward pressure from cooling
inflation. If history is a guide, monetary policy hold cycles tend to spell
a higher-than-average monthly return for gold".

 

The WGC also states that a more positive gold environment would result from
a more pronounced economic downturn, thanks to an accompanying increase in
volatility and risk-off appetite.

 

Conversely, gold would face challenges if tightening continues for longer
than expected.

 

"Similarly, if a soft landing were engineered, it would favour risk-on
assets and a stronger dollar, likely resulting in gold disinvestment.

 

"However, given the inherent uncertainty in predicting the global
macroeconomic outcome, we believe that gold's positive asymmetrical
performance can be a valuable component to investors' asset allocation
toolkit," the WGC concludes. 

 

 

 


 

INVESTORS DIARY 2023

 


Company

Event

Venue

Date & Time

 

 	

 

 

 

 

 

 	

 

 

 

 

 

 	

 

Heroes' Day

 

Aug 14

 

 	

 

Defence Forces Day

 

Aug 15

 

 	

 

 

 

 

 

 	

 

 

 

 

 

 	

Counters trading under cautionary

 

 

 

 	

CBZH

GetBucks

EcoCash

 

 	

TSL

Econet

Turnall

 

 	

First Capital Bank

ZBFH

Fidelity

 

 	

Zimplow

FMHL

 

 

 	

 

 

 

 

 	

Invest Wisely!

Bulls n Bears 

 

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DISCLAIMER: This report has been prepared by Bulls 'n Bears, a division of
Faith Capital (Pvt) Ltd for general information purposes only and does not
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been compiled from sources believed to be reliable, but no representation or
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opinions expressed and recommendations made are subject to change without
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for guideline purposes only and sourced from third parties.

 

 	

 

 

 	

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