Bulls n Bears Daily Market Commentary : 25 October 2023

Thu Oct 26 06:16:09 CAT 2023

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Bulls n Bears Daily Market Commentary : 25 October 2023

 <https://www.dulys.co.zw/> ZSE commentary

The ZSE All Share Index traded 1,022.98 points higher to close the session
at 148,170.05 points. Trading in the positive: DELTA CORPORATION LIMITED
added $63.4604 to

$2591.6989 and DAIRIBORD HOLDINGS LIMITED increased by $16.0000 to
$476.0000.  SEED CO LIMITED gained $7.3846 to close at $740.0000, FBC
HOLDINGS LIMITED   was $5.5802 up at $753.9280 and FIRST MUTUAL PROPERTIES
LIMITED added $4.9769 to $137.0723.

Trading in the negative: BRITISH AMERICAN TOBACCO LIMITED lost $107.0929 to
close at $13892.8571. CBZ HOLDINGS LIMITED shed 29.0909 to close at
$1780.9091 and EDGARS STORES LIMITED eased $8.0667 to $87.3333. ECOCASH
HOLDINGS LIMITED lost $1.0285 to $138.9309 and STAR AFRICA CORPORATION
LIMITED  decreased by $0.0055 to close at $4.9698.

EXCHANGE TRADED FUNDS (ETF)

MORGAN & CO MADE IN ZIM EXCHANGE TRADED FUND  ,OLD MUTUAL TOP 10 ETF , CASS
SADDLE AGRICULTURE EXCHANGE TRADED FUND , MORGAN & CO MULTISECTOR EXCHANGE
TRADED FUND  and DATVEST MODIFIED CONSUMER STAPLES EXCHANGE TRADED FUNDS
remained flat at $6.7800,$32.6000,$7.2500,$250.0000 and $7.2400 respectively

REAL ESTATE INVESTMENT TRUST (REIT)

TIGERE REAL ESTATE INVESTMENT TRUST shed $4.9591 to $239.5791

.-zse

Global Currencies & Equity Markets

Nigeria

Naira In A Free Fall

A recent report by a foreign rating agency had declared that Nigeria’s
currency, the Naira, is the most devalued anywhere in Africa. Its current
rate of N1,235 to the dollar may have confirmed that assessment.  Even the
CFA franc used by the country’s francophone neighbours has since overtaken
the Naira in the scale of value vis-à-vis some major currencies of the
world.

For a currency that used to be accepted as a medium of exchange in places
like London, a major world financial centre, the present state of affairs
is, to say the least, disheartening.

It needs be stated that this unsavory development is recent as, not too long
ago, the currency was treated with the decency it deserved in its
competition with others elsewhere.

In those days that are beginning to seem like centuries ago, the productive
sector of the country was booming, at least by African standards. Investors,
(not fly- by- night portfolio investors) were flowing in to take advantage
of the favourable investment climate in the country then.

The textile factories that survived on the lush cotton farms in parts of the
North, the automotive companies that sourced a sizeable portion of their
inputs from Nigeria were doing good business, transferring technology and
creating jobs. Tyre producing companies, the Dunlops and Michelins of this
world, promoted the cultivation of rubber in parts of the south south and
were empowering local, small holder farmers.

There were many industries producing household products most of which
sourced their raw materials from cocoa, palm oil and groundnut all grown in
the country. Food drinks were not left out in that drive to really grow the
economy and build its Gross domestic Product (GDP). The success of that
effort reflected on the value of the Naira, there was minimal stress on the
local currency. Foreign currencies were not as dominant as they are today.

Without warning, or to put it correctly, policy inconsistency and
ill-advised import substitution preferences, subdued the agricultural sector
and, by implication, the industries that relied on it. This was made
possible by the years of easy petro-dollar that lulled everyone into a state
of complacency, especially policy-makers, who began to feel that money was
not the problem but how and on what to spend it.

Before the nation realized sufficiently that the economy was on a downward
spiral that kept chipping off the value of the Naira, it was already too
late as there was not enough dollar and pound to finance the indecently
acquired taste for imported goods and services.

A lot of measures were put in place to manage the drift which ended up
compounding the problem that is presently trying to strangulate the Naira.

To the consternation of the citizenry, already used to bank transactions
when the need for foreign currencies arose, black market emerged from
nowhere and took over the space. Their rates have become the benchmark for
assessing the true value of the Naira.

That market has defied every effort by the regulatory agency, the Central
Bank of Nigeria (CBN), to control its dominance of the foreign exchange
market, to no avail. Instead, round-tripping, a process of obtaining foreign
currencies at the official rate and selling them at the black market at
higher rates, has continued unabated.

The situation is made worse by the deposit money banks (DMBs) who randomly
refer their customers to this market if they needed foreign currencies above
a certain limit. Curiously, this so-called black market, an outlet for
underhand transactions elsewhere patronized by shady characters, is accepted
as the real deal in Nigeria.

All these have contributed to the weakening of the Naira with the disastrous
effect that it is having on the economy generally. Cost of living has become
outrageously high. Businesses are struggling to keep their heads above
water.

Unfortunately, in our view, there is no quick way out of the quagmire other
than for the nation to reorder its priorities. Already, the nation’s foreign
reserve is depleted. What this means is that the nation must look inwards if
the present situation is to be reversed.

Without productive activity, there is not much anyone can do to save a
situation that is becoming increasingly dire. If we desperately need foreign
exchange as we presently do, then we must be ready to earn it.

The continued importation of petroleum products is a drain on scarce foreign
exchange. Non essentials like medical and educational tourism at state
expense must be de-emphasised. Rebuilding the nation’s hospitals, schools
and refineries will help.

In our considered opinion, a serious and determined approach to the
diversification of the economy away from hydrocarbon is a policy that must
necessarily escape the lip service it is presently receiving. Non-oil
sectors such as solid minerals, agriculture and tourism must take the front
burner of economic discourse.

Above all, it is the view of this newspaper that the nation must wean itself
off its import dependency and focus on economic activities that promote
local sourcing of raw materials and produce for export. That is the way out
of what is going on now. That is the way to restore the value and prestige
of the Naira. What is required is the political will to do the needful.  

 <mailto:info at bulls.co.zw> 

Global Markets

US dollar edges higher as risk sentiment sours, treasury yields rise

The US dollar edged higher against a basket of currencies on Wednesday, as
investors' appetite for riskier currencies faded following lacklustre
corporate results that raised worries over the economic outlook, and as
treasury yields rose.

Risk sentiment took a hit as tech giant Alphabet slumped after its cloud
division missed revenue estimates, while other mega-cap stocks also edged
lower, pressured by rising US . Treasury yields.

The dollar index, which measures its strength against a basket of six
rivals, was 0.2% higher at 106.46, having touched its highest level for
nearly a week at 106.52.

"I think it is mainly a risk backdrop story," said Shaun Osborne, chief
foreign exchange strategist at Scotiabank in Toronto. "Weak risk appetite
seems to be driving broad USD gains.

Benchmark US 10-year Treasury yields inched higher, resuming a move toward a
16-year peak of 5.0% briefly breached on Monday. The 10-year yield was last
at 4.9165%.

Global financial markets have been gripped by a surge in US. bond yields,
which helped drive the dollar index to its highest in almost a year earlier
this month.

Analysts, however, see limited room for yields and the dollar to extend
gains.

"My inclination is to look at these gains as an opportunity to fade some of
the dollar strength against certain currencies," Scotiabank's Osborne said.

Elsewhere, the Australian dollar jumped on Wednesday after a surprisingly
high reading for inflation stoked speculation about a further hike in
interest rates and slugged bond futures. But it erased all those gains to
trade down 0.52% on the day. [AUD/]

"The interesting thing about Australia is that a lot of other central banks
are in a very similar position. They have paused, the market's hoping that
will be it, but everyone is on tenterhooks hoping that inflation will remain
well behaved, and in the case of Australia it has not," said Jane Foley,
head of FX strategy at Rabobank.

The Canadian dollar weakened against its US . counterpart after the Bank of
Canada held its key overnight rate at 5.0%, as expected, and forecast weak
growth while leaving the door open to more rate hikes to tame inflation that
could stay above target for another two years.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Safe-haven gold gains on MidEast conflict; US data in focus

Safe-haven gold gained on Wednesday, buoyed by continued conflict in the
Middle East, while investors looked forward to key U.S. economic data for
further cues on the Federal Reserve’s policy path.

Spot gold

was up 0.5% at $1,979.79 per ounce, having declined in the previous two
sessions and trading below a five-month high hit last week. U.S. gold
futures

rose 0.3% to $1,991.90.

The geopolitical concerns are not going away in the short term, which will
continue supporting gold, said Bob Haberkorn, senior market strategist at
RJO Futures.

Israel’s military intensified its bombing of southern Gaza overnight, amid
international calls for a pause in fighting.

Limiting bullion’s gains, the dollar index and benchmark U.S. 10-year
Treasury yields inched higher.

Investor attention turns to U.S. third-quarter GDP figures due on Thursday
and the U.S. PCE price index on Friday that could impact the Federal
Reserve’s outlook on interest rates.

Higher interest rates raise the opportunity cost of holding non-yielding
gold.

Markets are widely expecting the Fed to keep rates on hold at its policy
meeting next month, according to the CME FedWatch tool.

If the data shows a slowdown, it will give Fed more reason not to raise
interest rates, which should be very supportive for gold and see prices back
above $2,000, added Haberkorn.

U.S. business activity ticked higher in October while output in the euro
zone took a surprise turn for the worse, surveys showed on Tuesday,
underscoring the diverging path for central bankers in the two regions.

On the physical front, China’s gold consumption in the first three quarters
of 2023 climbed 7.32% from a year earlier on increasing demand amid economic
recovery, the China Gold Association said.

Spot silver fell 0.3% to $22.87 per ounce, platinum gained 1.6% to $898.08
and palladium was up 0.9% to $1,130.20.

.

INVESTORS DIARY 2023

Company

Event

Venue

Date & Time

Counters trading under cautionary

CBZH

GetBucks

EcoCash

Padenga

Econet

RTG

Fidelity

TSL

FMHL

ZBFH

Invest Wisely!

Bulls n Bears 

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