Bulls n Bears Daily Market Commentary : 08 January 2024

Tue Jan 9 07:22:29 CAT 2024

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Bulls n Bears Daily Market Commentary : 08 January 2024

ZSE commentary

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

Business in limbo over tax measures; ZSE maintains gains

HARARE - Stocks maintained their positive run at the start of the week albeit at a much slower pace than seen in the first week of January. Investors' focus right at the start 2024, however, remains on the disruptive tax administration challenges following the new measures legislated through the Finance Act 2 of 2023.

On Saturday, industry announced that there had been a moratorium on elements of the Finance Act, which include route to market regulations, VAT on basic commodities and the new sugar tax. The meeting agreed, after consultation from both the President and the Vice President who is in charge of economic affairs, that there be a temporary suspension on the implementation of these elements. However while CZI put out a statement, government is still to officially confirm through a statement and subsequent legal instruments.

Well-placed sources said that Zimra insists that without further direction from the authorities, implementation of the new measures is going ahead putting pressure on business to comply with the regulations while passing on the costs to consumers.

At close, the All Share Index added 0.83% to 255 730.17 as local currency depreciation continue to ignite ZWL inflationary pressures and subsequent value erosion. The country is now at the peak of its lean forex season with the completion of tobacco exports and softening of global commodity prices. The Reserve Bank of Zimbabwe’s Monetary Policy Committee is expected to announce measures to judiciously allocate fx resources and on how to deal with the demand side in order to ensure stability this quarter.

Market bias was strongly positive with gainers at 17 against three fallers. Trading volume was at 3.67 million shares yielding turnover of $1.26 billion. EcoCash brought in the most volume at 2.14 million shares but it was Econet which led in value at $477.45 million. Foreigners were net sellers at $9.51 million against purchases of $8.18 million. Trades amounted to 233 with Econet the most active at 47.

The Top 10 Index was 0.62% ahead to 114 583.46. Marginal gains were seen in Delta, which added1.25% to 503 161.11c and Hippo which put on 0.27%.

Econet traded 0.27% lower to 100 771.07c as did BAT to 1 300 000c.

The Medium Cap rose 0.77% to 988 996.25. General Beltings led the risers with a 48.13% gain to 3 555c and Edgars advanced 15% to 13 250c.  Seed Co also hit limit up to 115 000c on a single transaction worth $115 000. Struggling miner RioZim added 12.50% to 90 000c in another low value transaction of 100 shares.

Mash Holdings was the day's worst performer losing 2.95% to 15 532.50c. 

The ETFs saw fractional movement on turnover of $9.28 million.

On the VFEX, turnover was strong at US$466 682.36 supported by volume in Simbisa and Innscor at 756 757 and 532 489 shares respectively. However, the All Share closed lower at 0.84% to 97.65. 

Seed Co lost 3.07% to 30 US cents in a low volume trade of 100 shares. Padenga was down 2.50% to 17.55 US cents while Innscor pared 1.33% and Simbisa shed 1.03%.

Global Currencies & Equity Markets

South Africa

South African rand starts week slightly weaker

JOHANNESBURG: South Africa’s rand fell slightly early on Monday, as risk appetite was subdued ahead of a key U.S. inflation report later in the week.

At 0630 GMT, the rand traded at 18.7300 against the dollar, about 0.1% weaker than its previous close.

A reading on U.S. inflation due on Thursday is expected to provide some clarity on the Federal Reserve’s monetary policy outlook, which often determines direction for emerging market currencies like the rand.

Central bank data released on Monday showed that South Africa’s net foreign reserves rose to $56.900 billion at the end of December from $56.319 billion in November, while gross reserves increased to $62.518 billion in December from $61.721 billion the previous month.

Monthly manufacturing data due later this week will give further clues about the health of the local economy.

South Africa’s benchmark 2030 government bond was weaker in early deals, with the yield up 1 basis point to 9.875%.

Nigeria

Naira strengthens against the US dollar to N856.57/$1 in the official market   

Naira further gained against the dollar on Monday, 8th December 2024 at the official market, marking the third gain in the New Year.   

The domestic currency appreciated 1.45% to close at N856.57 to a dollar at the close of business, data from the NAFEM where forex is officially traded, showed.   

This represents an N12.56 gain or a 1.45% increase in the local currency compared to the N869.13 closed the previous day.        

Similarly, the naira appreciated at the parallel forex market where forex is sold unofficially, the exchange rate quoted at N1245/$1, representing a 0.80% increase over what it closed the previous day, while peer-to-peer traders quoted around N1235.17/$1.    

What you should know    

Afreximbank recently released $2.25 billion out of the $3.3 billion foreign exchange (FX) support facility to Nigeria’s FG to relieve the acute liquidity shortage in the country’s FX market.   

This pivotal agreement was officially signed on December 29, 2023, marking a milestone in the financial cooperation between the involved entities, who also recently signed a $150 million deal.   

In this strategic financial arrangement, Afrexim Bank, fulfilling its role as the Mandated Lead Arranger, works in close coordination with the United Bank for Africa, which assumes the responsibility as the Local Arranger.   

The facility was successfully finalized with NNPC Limited acting as the principal financier.   

The arrangement also includes Guvnor and Sahara Energy as key participants in the transaction, highlighting the collaborative effort of multiple stakeholders.   

The total transaction value is US$3.3 billion, a facility obtained through Afrexim bank to help boost dollar supply towards alleviating Nigeria’s current FX supply challenges in the NAFEM official trading window.   

The first tranche of the transaction amounts to US$2.25 billion. This sum will be deposited into a designated account at the Central Bank, and it is expected to ease forex liquidity pressures.   

UBA is also functioning as the Onshore Depository Bank for this arrangement.   

The Nigerian National Petroleum Corporation (NNPC) is facilitating the financing of this transaction, acting as a lender. Other major oil trading firms involved as sub-lenders include Sahara Energy, Vitol, Oando, and Gunvor.   

In addition to their roles in the transaction, UBA, Sahara Energy, Vitol, Oando, and Gunvor contributed $100 million to the facility.   

 -

 <mailto:info at bulls.co.zw> 

Global Markets 

Dollar pulls back, bitcoin jumps ahead of ETF approval deadline

The dollar paused its rally on Tuesday, as traders reaffirmed their bets for a slew of Federal Reserve rate cuts this year on the belief that inflation in the U.S. is slowing sufficiently.

In cryptocurrencies, bitcoin

hovered near its strongest level since April 2022 on growing anticipation of imminent approvals of spot bitcoin exchange-traded funds, or ETF.

The euro

last stood at $1.0950, away from its recent three-week low of $1.0877, while the Japanese yen

distanced itself from the 145 per dollar level following a broad decline in the greenback as U.S. Treasury yields slipped. 

The moves were partly driven by the New York Fed’s latest Survey of Consumer Expectations which showed that U.S. consumers’ projection of inflation over the short run fell to the lowest level in nearly three years in December.

A reading on U.S. inflation is due later in the week, which will likely provide further clarity on how much room the Fed has to ease rates this year.

“The big story last night, the catalyst, was the data regarding inflation expectations going forward,” said Kyle Rodda, a senior financial market analyst at Capital.com.

“While it’s still a tight labor market, we’re still seeing those sort of disinflationary impulses in the United States, which again raises the probability that the Fed will have capacity to cut rates fairly soon.”

Futures point to nearly 140 basis points worth of easing priced in for the Fed this year. 

Against a basket of currencies, the U.S. dollar

eased slightly by 0.08% to 102.22, having risen 1% last week.

Sterling

advanced 0.04% to $1.2754, while the risk-sensitive Australian and New Zealand dollars likewise edged higher.

The Aussie

last gained 0.04% to $0.6723, away from its three-week low of $0.6641 hit last Friday. The kiwi

rose 0.05% to $0.6256 and was similarly some distance away from Friday’s three-week trough of $0.6182.

In Asia, data on Tuesday showed core inflation in Japan’s capital slowed for the second straight month in December, taking some pressure off the Bank of Japan to rush into exiting ultra-loose monetary policy.

The yen

was little changed following the release, and was last 0.17% higher at 143.975 per dollar.

Elsewhere, bitcoin

hovered near the $47,000 mark and last stood at $46,923, after having scaled a 21-month top of $47,281 in the previous session.

A raft of investment managers had on Monday disclosed the fees they plan to charge for their proposed spot bitcoin ETF, in another step toward approval this week by the U.S. securities regulator.

“Obviously, there’s clearly fundamental reasons why you’d feel bullish about this - it shows greater integration of crypto assets into the traditional financial ecosystem, there’s likely going to be increased flow and demand, by extension, for bitcoin and other cryptocurrencies,” said Capital.com’s Rodda.

“What I’d be very wary of is a ‘buy the rumor, sell the fact’ situation.”

Ether

, the second-largest cryptocurrency, steadied at $2,314.70.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold retreats to three-week low ahead of U.S. inflation data

Gold prices fell to a three-week low on Monday, pressured by elevated Treasury yields as expectations for an imminent Federal Reserve interest rate cut faded, with investors looking ahead to this week’s U.S. inflation data for more clarity.

Spot gold

was down 0.9% at $2,027.63 per ounce, after touching its lowest price since Dec. 18 earlier in the session. U.S. gold futures

fell 0.8% to $2,034.1.

The release on Friday of data showing the U.S. added more jobs in December than expected by economists in a Reuters poll prompted some doubts in financial markets that the U.S. central bank would start cutting interest rates in March.

“Maybe that takes some of the rate-cut odds off the table or lowers them to some degree,” said Daniel Pavilonis, senior market strategist at RJO Futures.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

The benchmark U.S. 10-year Treasury yield

remained above 4% on Monday.

The market currently sees a 69% chance of a rate cut at the Fed’s March 19-20 policy meeting, according to the CME FedWatch Tool. The U.S. government is scheduled to release its monthly consumer price index report on Thursday.

“If and when a recession becomes apparent, the Fed can be expected to cut rates, likely weakening the dollar and benefiting the dollar gold price,” Heraeus Metals said in a note.

Spot silver

fell 0.4% to $23.08 per ounce and platinum fell 1.5% to $945.69.

Palladium lost 2.9% to $997.35, falling for a tenth straight session.

“In aggregate, price risk remains to the downside for palladium for 2024, and it is likely that the price will slip back below $1,000/oz at some point this year” Heraeus Metals 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!

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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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