Bulls n Bears Daily Market Commentary : 09 May 2023

Tue May 9 18:39:43 CAT 2023

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Bulls n Bears Daily Market Commentary : 09 May 2023

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ZSE commentary

Turnall anchors the volume aggregate…

Turnall emerged the major volume driver of the day as 51.69m shares representing 10.48% of the total issued shares exchanged hands. The trade accounted for a gigantic 89.18% of the total volume traded. Delta was the top traded counter by value claiming 66.00% to the outturn. The other notable value drivers were Econet (13.09%) and Turnall (11.79%). Activity aggregates traded mixed as volumes tumbled 73.50% to 59.04m while, value outturn soared 197857.97% to $3.39bn.

The market enjoyed a positive breadth of nineteen as twentytwo stocks firmed up against three that lost pace. The trio of First Mutual Properties, Tanganda and Meikles gained a similar 15.00% to close at respective prices of $27.6000, $482.9966, and $645.2000. Sugar producer Hippo Valley Estates followed on a 14.81% surge to $1,158.5968 as beverages giant Delta capped the top five winners of the day on a 14.35% jump to $1,284.5129. The top three fallers of the day were led by Willdale that dropped 2.36% to settle at $3.8869. Banking group CBZ retreated 0.97% to $311.9333 while, media entity Zimpapers shed 0.03% to end pegged at $5.9800. The primary All-Share Index advanced 9.80% to close at 59355.89pts while, the ZSE Top 10 Index rose 12.11% to 36506.16pts. The ZSE Agriculture Index was 6.37% stronger at 222.29pts while, the Mid-Cap Index added 2.33% to finish at 106191.27pts. The ETFs traded a cumulative 1.08m units worth $10.75m. Datvest grew 14.80% to $2.8700, MIZ gained 14.61% to $2.2400, and the Old Mutual ETF ticked up 4.90% to $10.0694. The Tigere REIT improved 0.31% to $50.6144 as 1.07m units worth $54.21m traded.-efesecurities

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets

South Africa

South African rand steady as markets cautious ahead of US CPI print

(Reuters) - The South African rand was steady in early trade on Tuesday, as investors across global markets maintained a cautious stance ahead of a closely watched U.S. inflation data due this week.

At 0615 GMT, the rand traded at 18.3500 against the dollar , not far from its previous close of 18.3350.

No major South African economic data releases are due on Tuesday, so the rand is expected to mainly move on global drivers.

Investors are keenly focused on Wednesday's U.S. consumer inflation report after Federal Reserve chair Jerome Powell said last week that policy decisions will be "driven by incoming data," while signalling a likely pause in the rate hiking cycle.

The rand has underperformed relative to emerging market peers this year, as a power crisis showed no sign of abating and investor sentiment has been sapped by the country's "greylisting" by international financial crime watchdog the Financial Action Task Force.

The currency is down more than 7% against the dollar year-to-date.

Nigeria

Naira crash, dollar crunch hurt businesses

Nigeria-based businesses are facing major setbacks as a result of the currency crunch and run on the dollar, which is now required for many internal transactions.

Obinna Chisom, a Lagos-based entrepreneur, was in dire need of a loan to complete an ongoing housing project. He was lucky that a family friend, who in the first quarter received a huge payoff from a top oil company, came to his rescue by offering him soft loans at zero interest.

The creditor, who was paid off by Addax Petroleum Limited, following a take-over deal with the Nigerian National Petroleum Company (NNPC) Ltd – the sector’s government-backed regulator, gave Chisom a $10,000 loan, payable before year’s end.

But the loan came with a caveat. It must be repaid in dollars, not naira. Many individuals, businesses and banks no longer have confidence in the naira – the domestic currency which lost over 20% value in 2022, and is projected to record 30% depreciation this year.

The naira exchanges at N750/$1 at the parallel market, and N460/$1 at the official market, creating a N290 ($0.63) premium between both rates. 

Dollar crunch, triggered by a sharp drop in dollar revenues, has forced the CBN to ration the dollar supply to key sectors of the economy – at the expense of local businesses.

“I had no option but to accept repaying the loan in the same currency it came: US dollars. I understand the issue around paying back in naira because of the currency risk, which is real,” Chisom said. 

Other service providers like private jet charters insist on dollar payments. Some workers, such as in the oil and telecoms sectors, demand 50% of their salaries in dollars and the other 50% in naira. Rents for houses and business premises in several parts of Lagos, Abuja and Port Harcourt are priced in dollars.

Chukwuerika Achum, CEO of Falcon Aerospace Ltd, said its three premium services, Vivajets, CharterXE and FlyPJX – designed to ease business jet booking and promote inclusive access – are all priced in dollars. 

“The naira depreciation fears in sectors where inputs are in dollars have made us price our services in dollars to hedge against currency risks,” he explained during the services launch in upmarket Ikeja, Lagos in late April. 

An economist, Bismarck Rewane, said the naira crisis has increased the cost of aviation fuel (Jet A1) and raised operating costs for airline operators. For instance, the Jet fuel price rose by 60% to $1.70-$1.72 per litre, up from $0.43 per litre in 2021 and $1.08 per litre in 2022. This has increased airfares, triggered lower demand for flights and weighed on revenue. 

One fallout from this fixation on dollars is that many manufacturers who are unable to access forex for production are now using local raw materials for their operations and many imported finished goods are now locally fabricated. 

At the motor parts market in Mushin in Lagos, motorists now buy locally fabricated window frames, side mirrors, bumpers, brake pads, and even engine oil as prices of imported varieties  go out of reach. 

Daniel Okafor, managing director, Countryside Automobiles, said some motorists now demand local versions of vehicle parts which are affordable and also durable.

“Dollar scarcity and exchange rate crisis have forced the naira to slide to N750/$1 at the parallel market. With the high cost of imported vehicle parts, customers who cannot afford them now go for locally fabricated versions which are over 40% cheaper than imported versions,” he said.

 <mailto:info at bulls.co.zw> 

Global Markets

US dollar edges up as market looks to inflation data

(Reuters) - The dollar edged higher against a basket of its peers on Monday, shaking off earlier weakness as traders moved past an unsurprising loans survey toward other economic data that could provide fresh clues on the Federal Reserve's hiking path.

A quarterly survey of loan officers conducted by the Federal Reserve showed that banks continue to tighten credit and that there is weaker demand for business loans.

Following the survey, the dollar index , which measures the currency against six rivals, rose 0.08% to trade at 101.38, a better showing than the one-year low of 100.78 reached last month.

"People are now going to be able to finally just move forward towards the inflation report and that is probably why we are seeing more dollar strength," said Ed Moya, senior market analyst at OANDA in New York.

Moya said the credit crunch is likely to persist, which could justify recession calls and make Fed speakers anticipate a soft landing might not be possible. "But I think this report is supportive of a lot of the softness with loan demand that stemmed from the Fed's aggressive rate hiking campaign."

The Fed raised interest rates by 25 basis points last week but sounded slightly more cautious than other central banks on the outlook, dropping guidance about the need for future hikes.

So futures traders now see the Fed refraining from a hike in June and for fed funds to fall later in the year. The Fed's target range stands at 5% to 5.25%, having risen rapidly from 0% since March 2022. ,

The loan survey is the first in a series of closely watched U.S. economic data this week. Inflation data due on Wednesday could indicate whether the Fed must do more to rein in inflation. Traders remain watchful of the debt-ceiling impasse on Capitol Hill, with the Treasury Secretary warning the government might be unable to pay debts by June 1.

The euro fell 0.15% to $1.1003, after rallying nearly 16% from September lows, supported by expectations the European Central Bank will keep interest rates high for longer than the Fed. The ECB last week also slowed the pace of its interest rate increases but signalled more tightening to come.

Sterling also fell 0.12% to $1.2614. The pound hit a more than one-year peak against the dollar on Monday, with trading as high as $1.2668, its highest level since April 2022. The pound remains in focus this week ahead of an expected Bank of England rate increase on Thursday, and has also been firming versus the euro.

Elsewhere, the dollar rose 0.2% against the yen to 135.14.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold prices rise by ₹450 while silver declines ₹380

Spot gold rose 0.5% to $2,030.43 per ounce by 1021 GMT, while U.S. gold futures added 0.2% to $2,037.90.

Gold prices has risen by ₹450 to ₹61,300 per 10 grams in the national capital on Tuesday amid a rise in precious metal prices internationally, according to HDFC Securities.

In the previous trade, the yellow metal had finished at ₹60,850 per 10 grams.

Silver, however, went lower ₹380 to ₹77,400 per kg.

"Spot gold prices in the Delhi markets traded at ₹61,300 per 10 grams, up ₹450 per 10 grams," Saumil Gandhi, Senior Analyst - Commodities at HDFC Securities, said.

In the overseas market, gold was trading higher at $2,024 per ounce and silver was down at $25.45 per ounce.

"Comex gold traded higher in Asian trading hours on Tuesday as investors are waiting for vital US inflation reports this week that could influence the Fed's next interest rate decision," Sriram Iyer, Senior Research Analyst at Reliance Securities, said.

Gold prices edged up on Tuesday with focus on the US inflation readings for hints on future US Federal Reserve rate strategy as economic uncertainties prevailed.

Spot gold rose 0.5% to $2,030.43 per ounce by 1021 GMT, while U.S. gold futures added 0.2% to $2,037.90.

While bullion is considered an inflation hedge, higher rates dent the non-yielding asset's appeal.

Traders are currently pricing in an 88% chance of the U.S. central bank holding rates in June, after Fed Chair Jerome Powell said last week that policy decisions will be data driven, while also hinting at a likely pause in the cycle, reported Reuters.

US consumers' inflation expectations were mixed in April, the New York Federal Reserve's report showed.

INVESTORS DIARY 2023

Company

Event

Venue

Date & Time

Africa Day

May 25

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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