Bulls n Bears Daily Market Commentary : 14 June 2023

Thu Jun 15 04:20:18 CAT 2023

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Bulls n Bears Daily Market Commentary : 14 June 2023

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ZSE commentary

Market rebounds in mid-week session…

The market rebounded in the midweek session after a minor setback in the previous session. The primary All Share Index surged 2.84% to 185,349.94pts while, the Blue-Chip Index rose 2.52% to 114,023.47pts. The Agriculture Index added 0.46% to 667.28pts while, the Mid-Cap Index soared 10.19% to 333,434.86pts. The duo of First Mutual Properties and FBC Holdings headlined winners of the day on a similar 14.99% rise to settle at $104.3000 and $471.4000 respectively. Spirit and wines manufacturer AFDIS advanced 14.94% to $1,637.0000 while, brick manufacturer Willdale edged up 13.21% to $12.0000. Ariston Holdings completed the top five gainers’ pack on a 12.96% uplift to $19.4881. Leading the losers’ list was Nampak that shed 7.62% to settle at $55.0000 while, First Mutual Holdings trimmed 6.53% to $70.0989. Fintech group

Ecocash Holdings slipped 4.37% to $188.4981 while, Meikles tumbled 1.82% to close pegged at $2,357.1429. Zimplow Holdings capped the top five laggards of the day on a 1.15% drop to $110.0000. The market closed with a positive breadth of six after sixteen counters registered gains against ten that lost grip.

Activity aggregates were enhanced in the session as volumes traded climbed 710.39% to 20.11m shares while, value outturn ballooned 1,869.93% to $26.20bn. Nampak, NMB and Mashonaland Holdings were the top volume drivers of the day after contributing a combined 97.53% to the total. The top value drivers of the day were NMB (45.61%), Nampak (21.14%) and Delta (12.83%). On the ETF section, Datvest and MIZ firmed up 13.01% and 9.78% to $12.9963 and $6.4000 respectively. In contrast, Cass Saddle lost 0.01% to $4.5494 while, the Morgan & Co MCS trimmed 8.23% to $145.0000. The Old Mutual ETF dropped 0.16% to end the day pegged at $45.9107. The Tigere REIT grew 14.83% to $301.5588 as 1,283 units exchanged hands.-efesecurities

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Global Currencies & Equity Markets

South Africa

South African rand jumps ahead of Fed rate decision

(Reuters) - The South African rand jumped against the dollar on Wednesday, ahead of the U.S. Federal Reserve's interest rate decision.

At 1535 GMT, the rand traded at 18.3025 against the dollar , about 1.8% stronger than its previous close.

The dollar was last down 0.56% at 102.72.

"The market is holding its breath for the FOMC decision," said Greg Davies, head of wealth at asset manager Cratos Capital.

Slowing U.S. inflation increased bets that the Fed would skip a rate hike, but uncertainty remained about further rate increases.

The U.S. central bank's Federal Open Market Committee (FOMC) will announce its decision at 1800 GMT.

"Yesterday saw a moderation in U.S. consumer inflation figures... with markets seeing the outcome supportive of a June US rate hike pause, which supported the rand," said Investec Chief Economist Annabel Bishop in a research note.

Like most emerging market currencies, the risk-sensitive rand is susceptible to moves in global drivers such as the U.S. monetary policy and the dollar.

Locally, South Africa's retail sales fell 1.6% in April from a year earlier, government statistics released on Wednesday showed.

Shares on the Johannesburg Stock Exchange closed higher, with the blue-chip Top 40 (.JTOPI) ending up 0.2% and the broader all-share index (.JALSH) rising 0.3%.

South Africa's benchmark 2030 government bond was marginally stronger, with the yield down 1 basis point at 10.705%.

Nigeria

Nigeria allows naira to drop more than 36% on official market

(Reuters) - Nigeria's central bank allowed the naira currency to drop as much as 36% on the official market on Wednesday, days after President Bola Tinubu suspended the central bank governor who oversaw much-criticised multiple exchange rates.

A web of multiple exchange rates under Godwin Emefiele had led to foreign currency shortages and made it difficult for investors to take out money from Africa's biggest economy.

Traders said the central bank had removed trading restrictions on the official market, which drove the naira to a record low of 750 to the dollar on the official market, down from Tuesday's low of 477 naira to the dollar, Refinitiv Eikon data showed.

This was the first time since 2016 that the naira had recorded a big fall on the official market before the central bank introduced a managed exchange rate in 2017.

Charlie Robertson, head of macro strategy at FIM Partners, said: "A much needed devaluation which takes the currency from 50% overvalued to about 5-10% (cheaper). This should improve the current account and improve the long term investment climate."

The central bank did not immediately comment.

Tinubu inherited anaemic economic growth, record debt and shrinking oil output but he has promised to put the economy back on track and asked the public to support some painful decisions.

Foreign investors had flagged the forex restrictions as one of the biggest impediments to investing in Nigeria, which is Africa's biggest oil producer.

Unifying the exchange rate and scrapping a costly subsidy were the most immediate tasks that Tinubu had faced. Delivering these within the first two weeks of his presidency has cheered the markets.

"What we are seeing is the removal of distortions created by inefficient pricing of foreign exchange and in the next few weeks we should start seeing the naira finding its level," Bismarck Rewane, CEO at Financial Derivatives Company.

Nigeria's sovereign dollar bonds surged as much as 2.7 cents on the dollar on news of the devaluation, with longer-dated maturities rising the most, according to Tradeweb data.

The local banking index earlier surged 23% to a more than 20-year high, as investors snapped up financial firms for the second day following Emefiele's suspension.

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Global Markets

US dollar falls, but off four-week lows, as Fed signals more rate hikes

(Reuters) - The U.S. dollar slid on Wednesday after the Federal Reserve held interest rates steady, as expected, but signaled that borrowing costs will increase by another 50 basis points (bps) by end-December.

The dollar index was last down 0.3% at 103.01 after hitting a four-week low of 102.66 in the session.

The euro pared gains and last traded at $1.0827 , up 0.3%. Against the Japanese yen, the dollar fell 0.2% to 139.905 .

The rate-setting Federal Open Market Committee (FOMC) in a unanimous policy statement issued at the end of its latest two-day meeting, said "holding the target (interest rate) range steady at this meeting allows the committee to assess additional information and its implications for monetary policy."

While signaling more rate increases, Fed Chair Jerome Powell said in a press briefing that the U.S. central bank was not so far away from its target on the benchmark fed funds rate.

U.S. central bank forecasts showed most policymakers believe they will need to tighten monetary policy further.

Officials now expect the fed funds rate to top out at 5.6% this year, implying two more 25 bps increases in 2023, up from the 5.1% estimate in the last set of forecasts released in March.

"As much as inflation is moving in the right direction, it is moving slowly, and the Fed remains frustrated with its inability to move the needle on the unemployment rate," said Chris Low, chief economist at FHN Financial in New York, in emailed comments.

"The biggest surprise in the statement and SEP (summary of economic projections) is not the pause or the intent to resume hiking, it is the amount the Fed wants to hike."

Low cited St. Louis Fed President James Bullard's comment last month that he saw at least another 50 basis-point increase.

"James Bullard came across as most hawkish a couple of weeks ago. ... Turns out, he is smack in the consensus."

Traders added to bets, now at more than 70%, the Fed will raise rates again next month after skipping a hike in June.

"If we compare it to the last time interest rates were at 5.25%, it may well be the case that rates remain here for a while," said Srijan Katyal, global head of strategy and trading services at international brokerage firm ADSS, by email.

He noted that in 2006, the fed funds rate stood at 5.25% from July 2006 to August 2007 before being cut in the wake of the global financial crisis.

The Fed's decision was supported by a report on Wednesday showing U.S. producer prices fell more than expected in May, with the annual increase in producer inflation being the smallest in nearly 2-1/2 years.

Data out Tuesday showed the U.S. consumer price index edged up 0.1% last month after increasing 0.4% in April. In the 12 months to May, the CPI climbed 4.0%, the smallest year-on-year increase since March 2021.

The European Central Bank's rate decision is up next on Thursday, with markets pricing in a 25 basis-point hike and another in July before a pause for the rest of the year.

The Bank of Japan, due to announce a monetary policy decision on Friday, is expected to maintain its ultra-dovish stance and yield curve control settings.

Elsewhere, sterling rose 0.4% against the dollar to $1.2660, after hitting its highest since April 2022 of $1.2699. The chances of the Bank of England delivering a half-point rise when it meets next week have reached 20% surprisingly strong wage-growth data on Tuesday.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Yellow metal rates edge up in early trade; what should be your strategy for gold today?

Gold prices edged up in early trade in the domestic futures market on positive global cues. Yellow metal prices moved higher in international markets after the US dollar softened ahead of the Federal Reserve's policy decision. The latest US inflation data boosted hopes for a pause in rate hikes by the Fed which will be positive for gold.

"US consumer price index rose 4 per cent in May, its smallest annual increase in more than two years, but stayed well above the Fed's 2 per cent target. In the 12 months through May, core CPI climbed 5.3 per cent, showing that underlying price pressures remained strong," reported Reuters.

Read more: US consumer inflation cools for 11th straight month in May, rises just by 0.1%

MCX Gold August futures traded 0.18 per cent higher at ₹59,324 per 10 gram around 10:30 am.

What should you do?

Gold prices are expected to trade slightly volatile ahead of the US Fed outcome.

Manoj Kumar Jain of Prithvifinmart Commodity Research expects gold and silver to hold their key support levels of $1,934 per troy ounce and $23.50 per troy ounce respectively this week and prices to remain highly volatile due to FOMC meeting outcomes and volatility in the dollar index.

"Gold has support at $1,945-1934, and resistance at $1,970-1,984 per troy ounce. Silver has support at $23.55-23.35, and resistance is at $24.10-24.35 per troy ounce," said Jain.

"At MCX, gold is having support at ₹59,000- ₹58,770 and resistance at ₹59,480- ₹59,700 while silver is having support at ₹71,650- ₹71,100 and resistance at ₹72,700- ₹73,200. We suggest buying silver on dips around ₹71,600 with a stop loss of ₹70,990 for the target of ₹72,700," Jain said.

Rahul Kalantri, VP of Commodities at Mehta Equities expects gold and silver to remain volatile in today’s session.

"Gold has support at $1936-1,928 while resistance is at $1,957-1,965. Silver has support at $23.70-23.55, while resistance is at $24.10-24.25. In the Indian rupee terms, gold has support at ₹59,050- ₹58,870, while resistance is at ₹59,450- ₹59,640. Silver has support at ₹71,480- ₹70,920, while resistance is at ₹72,640– ₹73,120," said Kalantri.

Brokerage firm ICICI direct expects spot gold to hold the support near $1,930 levels and rise back to $1,960 levels on a weak dollar amid rising bets that the US Federal Reserve will hold rates unchanged at its much-awaited policy decision due today.

"MCX Gold prices are likely to move north towards ₹59,600 as long as they trade above ₹59,000 levels. MCX Silver is expected to follow gold and rise towards ₹72,500 as long as it stays above ₹71,700 level," said ICICI direct.

Brokerage firm SMC Global Securities believes gold may trade in the range of ₹58,900- ₹59,400.

Disclaimer: The views and recommendations given in this article are those of individual analysts and brokerage firms. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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 constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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