Bulls n Bears Daily Market Commentary : 01 February 2024

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Bulls n Bears Daily Market Commentary : 01 February 2024

 

 	

 

 

 	

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

 

Delta tops $40 bln turnover in two days as ZSE extends gains

HARARE - More funds poured into Delta for the second consecutive day as
Zimbabwe Stock Exchange shares maintained gains at the start of February
trades on Thursday. Turnover was strong at $28.5 billion after 5.52 million
shares traded.

Delta led in all the major activity matrices after 2.01 million shares worth
$22.68 billion traded. The shares, which included a $13.06 billion foreign
sell-off, were mostly being pushed from one fund manager (TN Asset), while
an ongoing share buyback has also helped to support volume and the price
over the last few days.

Just over $40 billion turnover has come from Delta in the past two days.

There was an overall pick up in activity across the board, with improved
volumes in select counters and an increase in the number of trades to 332.
This is amid reports of recent ZWL payments to government contractors where
some of the funds are finding their way into the stock market as a safe
haven. Some of the funds are also seeking hard currency in the black market
with the ZWL now being quoted within the range of 16 500 and 18 000 for big
amounts.

 

In the meantime, investors continue to await MPC resolutions for the meeting
which was held on Monday. These are expected to provide direction on the
path to exchange rate stability.

The All Share Index rose 5.41% to 572 092.73 on significant gains across the
board with the exception of the Small Cap Index. Market capitalisation was
at $46.03 trillion or US$4.46 billion using the official interbank rate of
10 315.0938.

The Top Ten Index was 4.97% higher to 258 447.28. Gains were seen in EcoCash
up 14.87% to 60654.57c and Econet up 14.21% to 246 120.60c. The two stocks
are currently trading under caution pending the transfer of EcoCash's
non-banking assets to Econet.  CBZ Holdings was 8.11% higher to 800 000c and
Hippo Valley put on 14.52% to 580 000c

The Medium Cap Index rose the most at 7% to 1 952 521.90. Ariston led the
risers as it caught up to the momentum. The stock gained 49.49% to 9 385.14c
despite releasing a lukewarm trading update earlier this week.

Fidelity, NMB, OK Zimbabwe and ZB Financial Holdings hit limit up at 47
035c, 170 705c, 54 670c and 208 125c respectively. Masimba advanced 14.59%
to 340 890.33c as it moved its market cap closer to $1 trillion.

Star Africa was the only faller after dropping 1.49% to 893.79c after the
group posted weak September interims, which were affected by reduced sales
volumes and an increase in operating costs.

The VFEX All Share was 1.21% higher to 103.76 after gains in African Sun at
20%. finx

 

 

 

 

Global Currencies & Equity Markets

 

 

South Africa

 

South African rand firms as dollar reverses gains

(Reuters) -South Africa's rand firmed on Thursday, as the U.S. dollar
reversed earlier gains despite the Federal Reserve's relatively hawkish
position.

 

South African rand firms as dollar reverses gains

At 1651 GMT, the rand traded at 18.5700 to the dollar, about 0.6% stronger
than its previous close.

 

The dollar was down about 0.5% against a basket of global currencies.

 

Federal Reserve Chair Jerome Powell on Wednesday pushed back against bets of
early U.S. rate cuts.

 

Locally, a survey showed on Thursday that South African manufacturing
activity in January fell to levels rarely seen.

 

"We still expect growth to pick up over the course of this year, but this
latest data reinforces the point that a marked improvement is unlikely,"
Capital Economics said in a note.

 

The Johannesburg Stock Exchange's Top-40 index closed 0.15% lower.

 

However, MultiChoice surged over 26% after Vivendi's Canal Plus offered to
buy all the shares it does not own in the South African company.

 

The benchmark 2030 government bond rose, the yield falling 4.5 basis points
to 9.705%.

 

 

Nigeria

 

Naira finds some relief as markets digest CBN actions

The naira pared some of its recent losses against the dollar on Thursday as
markets digested the latest policy decisions from the Central Bank of
Nigeria (CBN) to prop up the country's embattled currency.

 

On Wednesday, the CBN ordered banks to reduce their excessive foreign
exchange exposure by February 1 (Thursday) in a bid to shore up dollar
supply. It said the net open position limit of banks' overall foreign
currency assets and liabilities both on and off-balance sheet should not
exceed 20 percent short or zero percent long of shareholders' funds
unimpaired by losses, using the gross aggregate method.

 

The apex bank also removed the cap on exchange rates quoted by International
Money Transfer Operators (IMTOs), allowing them to quote exchange rates for
naira payout to beneficiaries using the prevailing market rates on a willing
seller, willing buyer basis.

 

Previously, IMTOs were required to quote rates within an allowable limit of
-2.5 percent to +2.5 percent around the previous day's closing rate of the
Nigerian foreign exchange market.

 

The naira appreciated to 1,400 per dollar on Thursday from a record low of
1,520/$ on Wednesday at the parallel market, commonly called black market,
data collated from different street traders show.

 

 

"The reason for the removal of the cap is to incentivise the IMTOs to
transparently transfer their receipt into the country," Aminu Gwadabe,
president of Association of Bureau De Change Operators of Nigeria (ABCON),
said.

 

He said the IMTOs were hitherto not remitting the actual remittance proceeds
into the official market but mostly kept it in the jurisdictions of receipts
at parallel market rates.

 

"It is hoped with the removal of the cap on IMTOs proceeds, the diversion
from the official markets of the proceeds will be reduced drastically or
eliminated. The likely impacts will be an increase in liquidity in the
market which will influence exchange rate and stability positively," he
said.

 

"Already, we have started seeing the local currency appreciating against the
dollar in the parallel market by about 6 percent from N1,520 yesterday to
N1,420/$ this afternoon in the market."

 

The ABCON boss called on the management of the apex bank to sustain the
tempo. "There is the urgent need in the immediate time to consider the
effective transmission mechanism roles of the BDCs through their inclusion
as the third leg of the market," he said.

 

 

Nigeria's currency today is the cheapest and best value of any in Africa, or
any of the emerging or frontier markets, according to FIM Partners' currency
model.

 

"Globally, only the Japanese yen is cheaper (and that's a pretty unique
story). The model doesn't have Lebanon/Venezuela/Zimbabwe," said Charlie
Robertson, head of macro-strategy at FIM Partners.

 

Following the CBN's directives to banks, the volume of dollar transactions
by willing buyers and willing sellers, consisting of banks, exporters and
investors, increased by 85.36 percent in the Nigerian Autonomous Foreign
Exchange Market.

 

The daily FX market turnover increased to $134.07 million on Wednesday from
$72.33 million on Tuesday at the official market.

 

The naira appreciated to 1,455.59 from 1,482.57 on Tuesday, data from FMDQ
Group shows.

 

 

Analysts at CSL Stockbrokers said the FX market may not witness a
significant influx of liquidity despite CBN's directive for banks to sell
down significant net long FX positions running into billions of dollars in
24 hours.

 

"Many of these dollar assets are not in cash. Firstly, we believe that many
banks will require CBN to grant a forbearance and will find other ways
besides throwing liquidity into the market to comply such as negotiating the
conversion of foreign currency loans to naira loans, a conversion that many
customers would likely require, given the devaluation of the naira," they
said.

 

They said banks with swap positions with the CBN may likely take on the
naira equivalent of such positions.

 

"We do not believe many banks will be in the market to sell dollars, so we
do not expect a significant influx of liquidity into the FX market," they
added.

 

They pointed out that banks that decide to sell their dollar assets at
current exchange rates would make significant realised gains which would
boost their 2024 earnings.

 

 

According to them, banks with more FX liabilities may suffer revaluation
losses when there is a devaluation of the naira, although banks will likely
avoid such a position if the currency points to a devaluation.

 

The analysts said the loss of revaluation gains may weaken banks' capital
adequacy ratio (CAR), and impact banks' ability to boost capital.

 

"The new CBN directives imply these windfall gains from long FX positions
will no longer be available to boost capital following a devaluation, which
may imply a weakening of the Capital Adequacy Ratio (CAR)," they said.

 

The directive may also negatively impact customers' ability to access
foreign currency loans, according to them.

 

"We also believe these new directives will likely reduce banks' appetite for
foreign currency assets, which earn less than local currency assets and may
have negative consequences for the supply of foreign currency loans to
support needed projects."

 

 

Analysts at SBG Securities expect CBN's policy changes on banks' FX
exposures to have mixed effects on the Nigerian economy.

 

"We anticipate a positive impact on foreign currency liquidity in the
interim, as banks move to achieve the new regulatory limit set by the
central bank. We estimate a range of USD4 billion - USD6 billion of
liquidity that could potentially enter the market as banks attempt to sell
down the excess above the new regulatory limit of 0 percent long," they
said.

 

They however said some banks might have the long position on their balance
sheet but without the liquidity in the immediate and may need forbearance
from the CBN as they might not be able to meet "the very tight deadline".

 

"We anticipate the market reacting negatively to this information in the
interim, as the impact of the policy on bank earnings in the short-term is
assessed. However, as the Central Bank continues to take steps to address
the FX liquidity situation, we think that market expectations for green
shoots appearing over the medium to longer term might not be out of reach,"
they added.

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

Global Markets

 

Dollar falls, traders price for rate cut by May

(Reuters) - The dollar fell against the euro and yen on Thursday as
investors continued to bet the Federal Reserve is closer to cutting interest
rates, even after Chairman Jerome Powell said that a move in March was
unlikely.

 

Powell said on Wednesday that rates had peaked and would move lower in
coming months, with inflation continuing to fall and an expectation of
sustained job and economic growth.

But he declined to declare victory in the bank's two-year inflation fight,
vouch that it had achieved a sought-after "soft landing" for the economy or
promise that cuts would come as soon as the March 19-20 meeting.

-

"The common theme that's emerging from central bankers is a reluctance to
indulge the market's pricing on rate cuts," said Adam Button, chief currency
analyst at ForexLive in Toronto.

The dollar initially bounced on Powell's comments that a rate cut in March
is not the "base case," but weakened on Thursday ahead of key jobs data on
Friday.

Traders are now pricing in a 39% probability of a March rate cut, and a 94%
chance of a rate reduction by May, according to the CME Group's FedWatch
Tool.

-

"Even though Mr Powell is out there saying directly we're not ready to do
this, the markets keep moving their anticipation for the first rate cut to
the next meeting," said Joseph Trevisani, senior analyst at FX Street in New
York.

Traders are expecting an economic slowdown, but they "haven't gotten it
yet", he added.

Friday's jobs report for January is expected to show that employers added
180,000 jobs during the month. (USNFAR=ECI), opens new tab

-

Data on Thursday showed that U.S. fourth quarter worker productivity grew
faster than expected, while initial claims for state unemployment benefits
increased in the latest week. U.S. manufacturing also stabilized in January
amid a rebound in new orders.

 

The dollar index was last down 0.55% at 103.04.

The greenback has also been pulled lower by tumbling Treasury yields on
renewed jitters over U.S. regional banks. A sell-off in shares of those
banks continued on Thursday, adding to losses from a day earlier when New
York Community Bancorp (NYCB.N), opens new tab reported pain in its
commercial real estate portfolio.

Those concerns may have also boosted the safe haven Japanese yen. The
greenback lost 0.45% against the Japanese currency to last trade at 146.29
yen.

 

The Bank of England, meanwhile, adopted a slightly more hawkish tone on
Thursday, even as it dropped its warning that "further tightening" would be
required if more persistent inflation pressure emerged.

BoE Governor Andrew Bailey said that "we need to see more evidence that
inflation is set to fall all the way to the 2% target, and stay there"
before rates can be lowered.

 

"While the ECB and the Fed are hinting at rate cuts, the Bank of England's
reticence for these discussions continues to make it stand out as an
outlier," said Kyle Chapman, FX market analyst at Ballinger & Co.

Sterling gained 0.46% on the day to $1.27455.

 

The euro rose 0.5% to $1.08720, after earlier dropping to $1.07800, the
lowest since Dec. 13. The single currency has been hurt by expectations that
the U.S. economy will hold up better than that of the euro zone.

The other rate decision on Thursday was from Sweden's Riksbank, which kept
its key interest rate unchanged at 4.00% as expected. The bank said that if
inflation continued to slow it might be able to bring forward the timing of
a first rate cut, possibly even to the first half of 2024.

Sweden's crown was steady against the dollar at 10.39 .

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

 

Commodities Markets


Gold demand hit record highs in 2023 amid geopolitical risks, China weakness

Gold demand hit record highs in 2023 as persistent geopolitical tensions and
weakness in China's economy pushed investors toward the safe haven asset,
the World Gold Council said in report.

 

Total gold transactions stood at 4,899 tons last year compared with 4,741
tons in 2022, inclusive of over the counter deals as well as stock flows
that reflect changes to inventories on commodity exchanges.

 

Unlike trading conducted by an exchange, OTC transactions take place
directly between two parties.

 

The biggest drivers of gold demand in 2023 were the Russia-Ukraine war and
Israel-Hamas conflict as well as the slowdown in China's economy - and these
could continue boosting the metal's prices well into 2024, said Shaokai Fan,
head of central banks at WGC. 

 

Prices hit an all-time high of $2,100 an ounce in December as central banks
as well as retail investors increased purchases of gold - central bank
purchases have exceeded 1,000 tons for two consecutive years. 

 

"2023 was the second highest year in history of central bank gold buying,
within a hair's breadth of the record high in 2022," Fan told CNBC in a Zoom
interview. 

 

The report showed that the People's Bank of China was the biggest buyer of
gold at 225 tons last year, bumping up its stock to 2,235 tons.

 

"If you as an individual will see that your own central bank is buying large
amounts of gold, you're at the very least more aware of gold . Or maybe
you're even influenced by the fact that your central bank is buying a lot of
gold, you may think of gold as a personal investment as well,"  Fan said. 

 

China's real estate crisis has also pushed more investors toward gold, he
highlighted.

 

China Evergrande, once among the country's largest property developers, was
ordered by a Hong Kong court to liquidate after the company failed to reach
an 11th-hour deal over the weekend to restructure.

 

The country's investments in gold bars and coins rose 28% from 2023 and
stood at 280 tons last year.

 

"Chinese investors are worried about the future of other asset classes, and
they're turning to gold as a way to protect their investment portfolios,"
Fan said. Gold has actually done very well in renminbi terms, and very well
compared to other asset classes in China." 

 

Gold jewelry purchases

Data from the World Gold Council showed that China dethroned India as the
world's largest gold jewelry buyer in 2023. 

 

People in China bought 603 tons of gold Jewelry in 2023, a 10% increase from
the previous year. 

 

This was largely due to a rise in weddings that were postponed after the
economy reopened from the pandemic in late 2022, Fan noted. 

 

He elaborated that gold purchases could rise further as the Lunar New Year
approaches, and according to Asian folklore, the upcoming Year of the Dragon
is a good year to have children. 

 

"More babies will generally [cause] a positive impact on gold demand," Fan
said, but warned that China's gold demand could fall after the first quarter
of 2024. 

 

Apart from rising gold prices and a slowdown in economic growth, this year
is predicted to be a less auspicious year for marriages, the WGC report
said. India too will have just 16 auspicious wedding dates in the first
quarter, compared with 28 last year.

 

Gold Jewelry purchases fell by 6% in 2023 to 562 tons from the previous year
due to the country's price sensitive market, Fan said.

 

2024 outlook 

Gold purchases this year are unlikely to meet 2023 levels, but a fall in
inflation could prevent a drastic drop in demand, WGC said. 

 

"Should inflation drop significantly consumers might start to feel wealthier
in real terms, which could mitigate some of the drop in demand." 

 

 

Inflation in the U.S. came in at 3.3% on a 12-month basis in 2023, still
above the Federal Reserve's 2% target, with Fed Chairman Jerome Powell
saying Wednesday that the U.S. Federal Reserve was unlikely to cut interest
rates in March.

 

The announcement triggered a 3% fall in gold prices which stood at $2,064
during Asia's Thursday morning trading session.

 

"During periods of persistent strong hyperinflation, gold does very well.
But during moderate inflationary periods, gold can go either way. It might
be determined by other factors as well," Fan said.

 

 


 

INVESTORS DIARY 2024

 


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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