Bulls n Bears Daily Market Commentary : 05 February 2024

Tue Feb 6 04:02:32 CAT 2024

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Bulls n Bears Daily Market Commentary : 05 February 2024

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

ZSE register gains in week opening session.

The market registered gains in the week opening session as the primary All
Share Index gained 3.84% to 594,074.74pts while, the Blue-Chip Index lost
6.24% to 242,330.46pts. The Agriculture Index fell 2.42% to 1,568.63pts
while, the Mid Cap Index firmed up 4.76% to 2,045,523.82pts. Conglomerate
Art Corporation and Riozim headlined the top performers of the day on a
similar 15.00% jump to $103.5000 and $1,035.0000 respectively. Retailer
OkZim surged 14.92% to close at $722.4797 while, Zimre Holdings grew 14.71%
to $201.0244. Banking group FBC Holdings capped the winners of the day on a
14.29% uplift to end the day pegged at $3,200.0000.  In contrast, CBZ
Holdings and seed producer SeedCo Limited led the laggards of the day on an
equivalent 15.00% decline to $7,820.0000 and $3,381.9500 respectively. Tea
producer Tanganda dropped 14.93% to settle at $2,860.0000 while, beverage
giant Delta retreated 14.07% to $8,600.1041. Hotelier Meikles Limited
completed the fallers of the day on an 8.28% slump to end the day pegged at
$6,190.9893. Thirteen counters registered gains against seventeen that
faltered to leave the market with a negative breadth of four.

Activity aggregates were depressed in the week opening session as volume
traded succumbed 41.96% to 3.21m shares while, value traded fell 74.10% to
$7.41bn. The trio of Econet, Okzim and Ecocash holdings contributed a
combined 75.82% to the total volume traded. The top value drivers of the day
were Econet (49.88%), Delta (34.81%), Okzim (6.65%) and Ecocash Holdings
(3.86%). On the ETF section, 137,450 units exchanged hands. Datvest inched
up 14.29% to $16.0000 while, Morgan & Co Multi Sector ETF edged up 0.11% to
close at $530.6000. OMTT ETF went up 0.76% to end the day pegged at
$98.1422. Both REITs were active in the week opening session as 2,280 units
exchanged hands. Revitus REIT soared 7.69% to $560.0000 while, Tigere REIT
notched up 1.92% to $604.1053.  -efesecurities

Global Currencies & Equity Markets

South Africa

South African rand flat ahead of mining conference and president's address

The South African rand was little changed early on Monday after dropping
sharply at the end of last week as a U.S. jobs report boosted the dollar.

The rand traded at 18.9050 against the dollar at 0701 GMT, close to its
Friday close of 18.9025.

Market-moving news this week could come from the Investing in African Mining
Indaba conference, which opened in Cape Town on Monday, and President Cyril
Ramaphosa's State of the Nation Address (SONA) on Thursday.

The S&P Global South Africa Purchasing Managers' Index (PMI) for January
will also be released on Monday.

On the stock market, the Top-40 index and the broader all-share index were
down about 0.3% in early trade.

South Africa's benchmark 2030 government bond was weaker in early deals,
with the yield up 1.5 basis points at 9.795%. 

Nigeria

Nigeria's latest devaluation may be 'turning point' in currency reform drive

(Reuters) - Nigeria's second currency devaluation in less than a year and
new forex rules suggest the central bank is gearing up to let the naira
float freely, but a huge backlog of orders for dollars and low liquidity may
stall reform momentum, investors and analysts said.

Foreign investors in particular will need more convincing that Africa's
biggest economy is finally ditching the controls that have for long
distorted its currency market, making the country of 200 million people less
attractive to foreign capital.

-

The official naira exchange rate last week plunged to as low as 1,531 per
dollar from 900, well below black market levels, after the market regulator
changed its closing rate calculation methodology, in a de facto devaluation.
The official rate had been drifting towards parallel market levels as forex
shortages funnelled demand to unofficial sources.

Also last week, the Central Bank of Nigeria (CBN) announced limits on how
much banks can hold in foreign currencies and eased rules on international
money transfer operators, allowing them to quote the naira at prevailing
market rates.

-

"You could call this a turning point," said Kyle Chapman, FX markets analyst
at London-based Ballinger & Co.

"Now that there is no longer a more favourable (exchange) rate, the lack of
incentives to take part in the official markets may turn into a tipping
point that sees a true free float emerge if the central bank does not
intervene," Chapman added.

Nigeria is struggling with a record amount of government debt, high
unemployment and power shortages that have contributed to years of anaemic
economic growth. Oil output is shrinking, and rampant insecurity means
swathes of the countryside are outside government control.

-

In his first days in office last year, President Bola Tinubu scrapped a
costly fuel subsidy and lifted some forex controls.

But the reform drive appeared to lose steam as the naira continued to weaken
without central bank intervention.

Andrew Matheny, senior economist with Goldman Sachs, said the latest
devaluation made the naira look "cheap."

"This makes foreign portfolio inflows potentially appear attractive, however
only in the circumstance that other aspects of monetary policy come
together," said Matheny.

These include ending financing the budget deficit through central bank
overdrafts, which increases the money supply and helped propel inflation to
28.92% in December, the highest level in nearly three decades.

FOREX BACKLOG

Years of forex controls have created pent-up demand for dollars while the
country struggles to raise its production of oil, its single largest export
earner.

Foreign currency shortages have created a large backlog of unpaid dollar
transactions, which the CBN last year put at nearly $7 billion.

On Monday, CBN governor Yemi Cardoso told broadcaster Arise TV that $2.2
billion remained outstanding and that $2.4 billion would not be honoured
after an audit found irregularities.

Goldman put the backlog at $12 billion, which has kept foreign investors
away due to worries they will not be able to take their money out.

"The economy is severely starved of dollars. The (forex)injections so far
appear to have not made a dent," said David Omojomolo, Africa economic at
Capital Economics.

"The FX backlog to my knowledge is still large, and the pronouncements that
it will be cleared 'soon' made for months now appear to encourage
speculation rather than stabilisation."

The CBN will later this month hold its first monetary policy meeting since
last July and it is under pressure to deliver a big hike in its benchmark
interest rate from the current 18.75%.

"For us to take a more active position in the local currency market we would
still need greater clarity on the direction... and exactly how they're going
to support the operations on the forex side with ... the monetary policy
side," said Yvette Babb, a hard and local currency debt portfolio manager at
William Blair.

The central bank's one-year treasury bill, for example, was selling at 17%
while the government's bill sold at 11% as the government seeks to keep its
borrowing costs low.

As long as big downside risks to local bond prices remain due to the
unanchored nature of short-term yields with regard to the policy rate -
reflected in the significant gap between the two - foreign investors will
avoid local debt, said Gergely Urmossy, emerging markets strategist at
Societe Generale.

"To restore the anchoring role of the policy rate, the CBN will have to
deliver money market reforms," Urmossy said.

 <mailto:info at bulls.co.zw> 

Global Markets

Dollar surges to 11-week high as Fed rate cut bets diminish

(Reuters) - The dollar climbed to its highest in almost three months against
nine other major currencies on Monday as traders slashed bets the Federal
Reserve would aggressively cut interest rates this year after new economic
data further diminished those odds.

U.S. services sector growth picked up in January as new orders increased and
employment rebounded, the Institute for Supply Management (ISM) said,
suggesting economic growth momentum from the fourth quarter spilled over
into the new year.

-

ISM's non-manufacturing PMI increased to 53.4 from 50.5 in December, higher
than 52.0 that economists polled by Reuters had forecast. A reading above 50
indicates growth in the services industry, which drives more than two-thirds
of the economy.

The data added to Friday's blockbuster U.S. jobs report that far exceeded
expectations and forced the market to readjust its outlook for rate cuts,
the dollar's strength and how high Treasury yields, which act to bolster the
U.S. currency, can go.

-

ISM services PMI

"The question is, who can keep up with the U.S. in terms of the rates
adjustment?" said Steven Englander, head of global G10 FX research and North
America macro strategy at Standard Chartered Bank in New York. "The market's
answer so far is not too many central banks and not too many of their
currencies."

Treasury yields started to rise early on Monday after Fed Chair Jerome
Powell said over the weekend that the U.S. central bank could "give it some
time" before cutting rates. Yields rose further on news of the ISM survey.

-

The dollar rose against all members of the G10 grouping of currencies that
are among the most liquid in the world.

The dollar index , which tracks the greenback against six other major
currencies, jumped to 104.60, its highest since Nov. 14, and was last up
0.36% at 104.40.

The two-year Treasury yield was last up 9.4 basis points at 4.4638%, after
jumping 18 bps on Friday.

The euro fell to its lowest since Nov. 14 at $1.0721 and was last down 0.43%
at $1.0744.

In an interview with the CBS News show "60 Minutes" that aired on Sunday but
was conducted a day before the jobs report on Thursday, Powell said the Fed
could be patient in deciding when to cut its benchmark interest rate.

"The prudent thing to do is ... to just give it some time and see that the
data confirm that inflation is moving down to 2% in a sustainable way,"
Powell said.

Japan's yen fell to its lowest since Nov. 27 at 148.89 per dollar, and was
last at 148.68.

Jane Foley, head of FX strategy at Rabobank, said a weak euro zone economy
was also likely weighing on the euro.

"We have stagnation in Germany," Foley said. "I think we're going into a
period when it's going to be really hard for the euro to make significant
gains."

Data on Monday showed that German exports fell more than expected in
December due to weak global demand.

RATE CUT EXPECTATIONS

Fed funds futures now show roughly 115 basis points (bps) worth of easing
priced in for the Fed this year, down from about 150 bps at the end of last
year.

A March cut is now seen as a 14.5% possibility, down sharply from 46.2% a
week ago, according to CME Group' FedWatch Tool.

Sterling was down 0.75% to $1.2537, its lowest since Dec. 13, as the dollar
rallied.

The pound showed little reaction to revised data that indicated Britain's
unemployment rate was lower than expected at the end of the year.

Bitcoin slid about 1.4% to 42,355.70 in late trading.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold hits more than one-week low as dollar strengthens, yields rise

(Reuters) - Gold dropped to more than a one-week low on Monday, weighed down
by a higher dollar and bond yields after a solid U.S. jobs report and
remarks from Federal Reserve officials dashed expectations of early interest
rate cuts.

Spot gold was down 0.6% at $2,027.09 per ounce by 2:09 p.m. EST (1909 GMT)
after hitting its lowest level since Jan. 25 earlier in the session.

U.S. gold futures settled 0.5% lower at $2042.9.

-

"We're seeing the hangover effect of the Friday strong jobs report which
pushed Treasury yields and the U.S. dollar index higher, and that's
continuing today, and weighing on gold," said Jim Wyckoff, senior analyst at
Kitco Metals.

However, gold should hold above the $2,000 level due to geopolitical
uncertainties in the market that could quickly prompt some safe-haven
demand, he added.

The dollar index rose 0.5% to trade near a three-month high, making bullion
more expensive for other currency holders, while yields on benchmark 10-year
Treasury notes climbed over a one-week high.

-

Data on Friday showed that U.S. nonfarm payrolls increased by 353,000 jobs
in January, the largest gain in a year.

The blowout job growth and large wage gains dashed prospects of a Fed rate
cut next month. Traders also lowered their bets for a cut in borrowing costs
at the end of the U.S. central bank's April 30-May 1 meeting.

Minneapolis Fed President Neel Kashkari said on Monday that a resilient U.S.
economy and a possibly higher neutral rate of interest means the central
bank can take time before deciding to reduce interest rates.

-

The Fed can be "prudent" in deciding when to cut its policy rate, with a
strong economy allowing central bankers time to build confidence that
inflation will fall further, Fed Chair Jerome Powell said in an interview.

Investors' focus now shifts to remarks from a host of Fed speakers this week
for further clues on the timing of rate cuts.

Spot silver fell 1.3% to $22.38 per ounce, while palladium was steady at
$946.96 and platinum gained 0.8% to $897.65.

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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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
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for guideline purposes only and sourced from third parties.

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