Bulls n Bears Daily Market Commentary : 12 September 2023

Wed Sep 13 06:16:46 CAT 2023

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Bulls n Bears Daily Market Commentary : 12 September 2023

ZSE commentary

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

The market is gaining momentum as most of the counters are registering
positive returns. As at the close of today's trading session, the overall
Market Cap closed 5.41% up at ZWL$11.64 trillion on the back of improved
market liquidity. Total turnover closed 13.19% down at ZWL$2,89 billion
regardless of a 29.72% increase in Total volumes traded. Econet and Delta
pushed the overall turnover for today as they accounted for almost 84% of
today's total turnover.

The benchmark All-Share Index closed 5.62% up at 145,437.37 points at the
back of 23 movers and 4 shakers. The Top-15 index went up by 5.80% to close
at 95,646.21 points, and 6.80% was added to the Top 10 Index which settled
at 71,725.12 points.

RioZim and Zimre Holdings led the movers list for today after hitting the
15.00% circuit breaker, closing at $690.00 and $74.75, respectively. NMBZ
Holdings trailed the list with a 14.97% gain as it closed at $184.05.
Proplastics and Turnall completed the top 5 gainers list after adding 14.89%
and 12.23%, respectively.

The shakers list for today was led by Dairibord which lost another 6.26% as
it closed at $560.00. OK Zimbabwe shed 0.51% to close at $144.28 and EcoCash
Holdings Ltd traded 0.47% weaker at $141.04.

Victoria Falls Stock Exchange (VFEX) 

The VFEX Market Cap went up by 0.77% to close the session at US1,18 million.

Global Currencies & Equity Markets

South Africa

South African rand slips as markets await US inflation data

(Reuters) - The South African rand weakened against the dollar on Tuesday as
markets await U.S. inflation data on Wednesday that could shed light on the
Federal Reserve's interest rate path.

At 1512 GMT, the rand traded at 18.9550 against the dollar , nearly 0.5%
weaker than its previous close.

The dollar last traded around 0.22% stronger against a basket of global
currencies.

"With no high impact South African specific data scheduled throughout the
week, U.S. and Chinese influences will play a major role," said DailyFX
analyst Warren Venketas in a research note.

The rand had jumped over 1% on Monday following encouraging economic data
out of China, its biggest trading partner.

Like other emerging market currencies, the risk-sensitive rand often takes
cues from global economic factors such as U.S. monetary policy in the
absence of major local drivers.

Shares on the Johannesburg Stock Exchange were little changed, with the
broader all-share index (.JALSH) and blue-chip Top-40 index (.JTOPI) ending
near their previous close.

South Africa's benchmark 2030 government bond was marginally weaker, with
the yield up 1 basis point at 10.400%.

Nigeria

Naira woes overshadow rare rise in dollar reserves

A rare rise in Nigeria's foreign currency reserves is proving just as
useless as a wooden frying pan for the country's embattled currency.

That's after the naira weakened by the most against the dollar this month to
N773.50 on Tuesday morning in official trading while sliding to a low of
N930 per USD on the streets despite the first increase in external reserves
in a year.

According to data from the Central Bank of Nigeria (CBN), gross official
reserves increased marginally by around $2 million at the end of August
2023, the first accretion since July 2022 when the gross official reserves
rose by $64 million.

The level of reserves is no longer an accurate gauge of the CBN's firepower
after it emerged in the apex bank's financial accounts that a large part of
the reserve is encumbered.

With the true level of the CBN's reserves in contention after the
government's foreign banker, JP Morgan, estimated net reserves at around $3
billion, which is about 10 percent of the gross reserves, the market now
takes the CBN reserves data with a pinch of salt.

What the market is however waiting for this week is for acting CBN governor,
Folashodun Shonubi, to make good his promise to clear a gaping FX backlog
that is undermining confidence in the latest currency reforms. Shonubi said
last week Monday that the backlog will be cleared in two weeks and now has
only this week to fulfill his vow.

Read also: Don't pay dividends with FX revaluation gains, CBN tells banks

"Although the exact mechanism remains undisclosed, what is clear is that
domestic banks will have a significant role in this process," said Tunde
Abidoye, head of research at FBN Quest Capital.

Shonubi did not specify whether he was referring to clearing the total
backlog in the market which is estimated at $10 billion or just the forward
backlog which is around $2.5 billion.

Sources close to the CBN however told BusinessDay that Shonubi was referring
specifically to settling the $2.5 billion foreign currency forward contracts
which had gone unpaid for six months.

Nigerian businesses from manufacturers to importers, who have been on a long
queue for dollars, have resorted to buying the greenback at a 15 percent
premium in the black market. The businesses drive demand to the market and
complicate the CBN's effort to attain a single exchange rate.

"Those owed forwards go to the black market today, so if the CBN paid the
forwards, black market demand would collapse," a source familiar with the
matter said.

"The naira will sell for close to the official rate, at least in the near
term, in the black market if the CBN keeps its word," another knowledgeable
source said.

Clearing the dollar backlog owed to local businesses is a big step towards
restoring investor confidence in Nigeria's foreign exchange market and
moving the country closer to reaping the fruits of a bold move in June to
allow the naira trade at a more market-reflective rate.

"If successful, it will be an important means of restoring confidence,"
Razia Khan, managing director and chief economist, Africa and Middle East
Global Research at Standard Chartered Bank, said.

Khan, who also said clearing the backlog "will help reduce the demand at the
parallel market in the near-term," was however not sure "..if the backlog
can be entirely cleared in two weeks, but it would be a massive boost to
confidence if it were cleared," Khan said in an emailed response to
questions.

Nigeria needs every bit of confidence it can get to fully revive its FX
market and boost the dollar supply needed to support the naira. The sharp
slide in the currency has been particularly painful for households and
businesses and it's on the heels of the removal of a costly petrol subsidy
which led to a doubling in the retail petrol price.

"It will help improve the confidence in the FX market and the economy," said
Muda Yusuf, Chief Executive Officer at Lagos-based private sector advocacy
firm, the Centre for the Promotion of Private Enterprise (CPPE).

Read also: Naira steadies at N930 per dollar on Monday

"There's been a collapse of confidence and that is fuelling a lot of
currency speculation in the black market," Yusuf said.

The gray area for investors is whether the CBN has the dollars to clear the
demand backlog.

Despite the CBN's decision to float the naira in June '23, it has had
limited success in increasing foreign exchange inflows, as offshore
investors have mostly remained cautious.

Monthly transactions on the investors' and exporters' (I&E) fx window for
the first eight months of 2023 are currently running at an average of
$2.1billion, compared with $2.4 billion over the comparable period of 2022.

At first glance, the total reserves as at end-Aug '23 covered 7.0 months of
merchandise imports on the basis of the balance of payments for the 12
months to December 2022 and 5.6 months with the inclusion of services.

However, the CBN's recent publication of its audited accounts after a long
period of non-disclosure, unveiled the possibility that the encumbered
portion of the reserves may exceed initial estimates.

For instance, the 2022 accounts revealed a securitised loan of around $7.5
billion owed to JP Morgan and Goldman Sachs, as well as FX forwards of
almost $7 billion.

 <mailto:info at bulls.co.zw> 

Global Markets

Yen gives back some gains, dollar rebounds before inflation

(Reuters) - The yen slipped on Tuesday after its biggest daily rise since
mid-July the day before after comments from Japan's top central banker on a
possible end to its negative interest rate policy reverberated throughout
markets.

The dollar, meanwhile, regained lost ground after clocking its biggest daily
fall since July 13 on Monday, while the pound slipped after mixed UK labour
market data.

Bank of Japan (BOJ) Governor Kazuo Ueda told a newspaper interview over the
weekend the bank could get enough data by year-end to determine whether it
can end negative rates, remarks that on Monday saw the yen clock its largest
daily gain against the dollar since July 12.

The Japanese currency was last 0.2% lower at 146.915 per dollar, after
scaling a one-week top of 145.91 in the previous session.

"Ueda's comments were a little more balanced than you would have thought
from the market reaction," said Adam Cole, chief currency strategist at RBC
Capital Markets.

"Japan is still a long way from meeting the criterion of sustainable 2%
inflation and the comments don't really on Monday change much for me," Cole
added.

The yen has come under immense pressure against the dollar as a result of
growing interest rate differentials with the United States, since the
Federal Reserve began its aggressive rate-hike cycle last year while the BOJ
remains a dovish outlier.

Taking a different view, however, Japan's senior ruling party official
Hiroshige Seko said on Tuesday he took Ueda's remarks as meaning that the
central bank will continue with monetary easing.

Elsewhere, the U.S. dollar reversed some of its losses from the previous
session, with the euro falling 0.3% to $1.0716 after touching a one-week
high of $1.0771 ahead of Thursday's European Central Bank policy
announcement.

The pound fell after a mixed UK labour market report that showed more signs
of cooling in the three months to July, but wage growth continued to rise
quickly, and above the rate of inflation.

"Drill down and if you strip out the public sector, private sector pay
barely increased in level terms between June and July," said ING UK
economist James Smith.

"With unemployment notching higher, the labour market data doesn't scream a
need to keep hiking rates much further."

Sterling was last down 0.3% against the dollar at $1.2471 and little changed
against the euro.

U.S. INFLATION DATA IN FOCUS

Attention was now turning to U.S. inflation data for the month of August due
on Wednesday, with traders on the lookout for whether the Federal Reserve
has further to go in raising rates.

The U.S. dollar index , which ended last week with an eight-week winning
streak, rose 0.2% to 104.80, after falling 0.5% in the previous session, its
biggest one-day drop since July 13.

"The U.S. data is the main event of the week because the Fed is so sensitive
to incoming inflation data," RBC's Cole said, noting that the bigger risk
for the dollar is to the downside, given a larger number of forecasts for
core inflation are above consensus.

"An in-line number would be disappointing for the dollar and therefore we're
negative on the release itself," Cole added.

The Aussie was last 0.2% lower at $0.6419 while the New Zealand dollar fell
0.4% to $0.5899.

The onshore and offshore yuan both found support near their one-week highs
and last bought 7.2925 per dollar and 7.3109 per dollar, respectively.

The two had clocked their largest daily gains against the dollar in about
six months on Monday.

Reuters reported that China's central bank was tightening its scrutiny of
bulk dollar purchases by domestic firms, at a time when the yuan faces
mounting depreciation pressure.

In cryptocurrencies, bitcoin rose almost 4% to $26,141, after falling below
$25,000 for the first time in three months on Monday.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold slips on dollar rebound as U.S. inflation test nears

Gold slipped to a more than two-week low on Tuesday as the dollar rebounded,
while investors positioned for the U.S. inflation print on Wednesday.

Spot gold was down 0.6% at $1,909.50 per ounce, its lowest since Aug. 25.
U.S. gold futures dipped 0.8% to $1,932.60.

"People are getting out of the market and waiting to see how the data comes
out, and maybe buy gold at a lower price because there's still (some) safety
buying in gold," said Bob Haberkorn, senior market strategist at RJO
Futures.

Making gold more expensive for other currency holders, the dollar index
gained 0.3% ahead of the U.S. consumer price index data due on Wednesday,
which could influence the Federal Reserve's interest rate decision.

Headline U.S. inflation climbed 0.6% in August, according to a Reuters poll,
versus a 0.2% rise the prior month. However, Americans' overall views on
inflation were little changed in August, the New York Fed reported Monday.

Higher interest rates dull non-yielding bullion's shine, with traders
betting on a roughly 47% chance of a hike in November after a widely
expected pause by the Fed next week, according to the CME FedWatch tool.

"Should the inflation figures print above market forecasts, gold prices are
likely to depreciate as expectations rise around the Fed having headroom to
hike one time this year." FXTM senior research analyst Lukman Otunuga said.

Traders also awaited the ECB's rate decision on Thursday. ECB euro
short-term rate (ESTR) forwards are pricing a bit more than a 50% chance of
a rate hike at this week policy meeting.

"Europe's economy is definitely facing a lot of challenges so eventually
safe-haven demand will emerge if investors see that the currency is going to
be under pressure," said Harshal Barot, a senior consultant at Metals Focus.

.

INVESTORS DIARY 2023

Company

Event

Venue

Date & Time

SeedCo International

AGM

Virtual

Sept 20 2023| 12:30pm

SeedCo

AGM

physical and virtual - SAZ Office Park, 1 Northland Close, Northridge Park,
Borrowdale

Sept 20 2023| 2pm

Hippo

AGM

The Country Club, 1 Brompton Road, Newlands

Sept 29 2023 | 9am

Counters trading under cautionary

CBZH

GetBucks

EcoCash

Padenga

Econet

RTG

Fidelity

TSL

FMHL

ZBFH

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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subscribe for any securities. The information contained in this report has
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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