Bulls n Bears Daily Market Commentary : 22 January 2024

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Bulls n Bears Daily Market Commentary : 22 January 2024

 

 	

 

 

 	


ZSE commentary

 

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

ZSE leaps ahead as FinMin hints at weak measures to support ZWL

HARARE – Zimbabwe Stock Exchange shares made a significant surge at the
start of the week as investors await the latest measures that will prop up
the local currency, which continues to lose value.  Traders on the
alternative market are now quoting within the range of 14 000 to 15 500.

Finance Minister was quoted as saying that some of the measures include a
redesign of the auction system, which is yet to start 2024 trades, and
addressing how to deal with the demand of the US dollar in the economy.
These measures are seen as weak and short-term in nature in the face of weak
domestic fundamentals such as excessive monetary growth and high inflation.

 


The All Share Index jumped 10.82% to 366 103.90 in a session which yielded
23 gainers and four fallers amid fears that the authorities might seek to
curb its rise when they announce the new ZWL support measures. A total of
five stocks hit limit up while downward movements were quite limited. The
ZSE now sits on January gains of 73.65%.

Shares traded amounted to 4.34 million with turnover at $6.94 billion after
268 deals. Delta contributed the most to value at $4 billion while Star
Africa saw the most volume at 1.8 million shares. Foreigners sold $179.17
million worth against purchases of $10.08 million.

 

The Top Ten Index leaped 12.23% to 168 905.91. Delta gained 15% to 762
129.18c as it inched closer to a US$1 using the official rate but remains
undervalued using the parallel market rate. BAT Zimbabwe was up 14.96% to 2
277 955c and Econet, which is set to re-absorb EcoCash's non-banking assets
put on 14.3% to 202 703c. FBC rose 14.71% to 130 070c and CBZ added 7.84% to
550000c in a low volume trade of 400 shares.

First Mutual was the worst performer, losing 3.37% to 110 000c. The group
recently received a corrective order from insurance and pension’s regulator
IPEC, which called for restitution of misappropriated funds in its Life
subsidiary.

The Medium Cap Index put on 4.91% to 1 199 007.49. Edgars, Masimba Holdings,
Dairibord and NMB also maxed out albeit on low volume.

Zimre pared 0.85% to 17 229.01c while Willdale and Ariston saw fractional
losses. 

 

REITs turnover was at $41.48 million after 32 trades.

On the VFEX, the All Share was up 1.25% to 97.01. Axia led the risers with a
16.47% gain to 7 US cents, Padenga put on 10.57% to 17.05 US cents and
Innscor was 5.47% higher to 44 US cents.

African Sun, which parted ways with its CEO this past weekend, was the worst
performer with a 19.25% loss to 4 US cents. Struggling miner Bindura Nickel
fell 11.50% to 1 US cent.

 

 

 

Global Currencies & Equity Markets

 

 

South Africa

 

Rand under pressure as rate cut hopes dim

The rand yesterday plunged to its lowest in three months after precious
metals prices slid on reduced hopes of rapid interest rate cuts by major
central banks, particularly the South African Reserve Bank (SARB).

 

The local currency came under more pressure and traded around R19.20 to the
US dollar most of yesterday, marking its lowest point since early October
2023, after ending the week at R19.01 to the greenback on Friday.

 

 

Investors this week are bracing for the release of inflation data and the
first rate decision of the year by the SARB, with analysts anticipating the
rates to remain unchanged as inflation risks remain.

 

SARB Governor Lesetja Kganyago said recently that inflation had remained
more sticky than anticipated and that it would need to move closer to the
target before monetary policy would be eased.

 

Old Mutual Group chief economist Johann Els said he anticipated the policy
repo rate would remain unchanged at 8.25%, marking the fourth consecutive
meeting without a rate change, with the prime interest rate currently at
11.75%.

 

Els cited ongoing upside inflation risks, including weaker global growth
impacting the rand exchange rate and consequently, inflation, as well as
potential threats to food prices from El Niño and the possible escalation in
conflicts that could drive oil prices higher.

 

However, Els was confident that interest rates would be cut by March on
further evidence of easing inflation, with a total reduction of 100 to 125
basis points possible throughout 2024.

 

“These lower inflation and interest rates, combined with the likely ongoing,
albeit slow, job recovery, should assist consumers,” Els said.

 

 

“I am optimistic that 2024 will turn out to be somewhat better, even if
still subdued, compared to 2023.”

 

In the US, the market is expecting the Fed to slow balance sheet run-off in
March and end quantitative tightening in June while the European Central
Bank is also likely to cut interest rates around June.

 

Investec chief economist Annabel Bishop pointed to escalating geopolitical
tension as impacting the rand as risk aversion rose after as Nato announced
plans for a largest preparatory exercise since the Cold War.

 

Nato said its “Exercise Steadfast Defender 2024” with the military exercise
taking place in Europe will be the largest Nato exercise in decades, with
participation from approximately 90 000 forces from all 31 Allies and good
partner Sweden.

 

The military drill will reportedly include more than 50 military ships
including aircraft carriers and destroyers, more than 80 actual fighter
jets, drones and helicopters, more than a thousand combat vehicles including
tanks and infantry vehicles.

 

“The rand has weakened to R19.21/USD, with escalating geopolitical tensions
as the Russian-Ukraine war has prompted a Nato allies manoeuvre for February
to May this year, named Exercise Steadfast Defender 2024,” Bishop said.

 

“The escalation in geopolitical tensions has caused risk aversion in global
financial markets to rise, weakening emerging markets currencies and so the
rand.”

 

Meanwhile, the JSE all share index was 0.4% down to 72 352 points as traders
continued to assess the outlook for interest rates while also monitoring the
ongoing earnings season.-iol

 

 

Naira

 

Naira appreciates to N1,350/$ in parallel market

THE naira yesterday appreciated to N1,350 per dollar in the parallel market
from N1,370 per dollar last week. Similarly, the naira depreciated to
N925.34 per dollar in the Nigerian Foreign Exchange Market (NAFEM).

 

 

Data from FMDQ showed that the indicative exchange rate for NAFEM rose to
N925.34 per dollar from N902.45 per dollar last weekend, indicating N22.89
depreciation for the naira.

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

Global Markets

 

 

US Dollar Drifts, US Indices Hitting Fresh Highs

The NASDAQ, S&P 500, and Dow Jones have all reached new record highs, which
means that the recent dip in the stock market from December to early January
has been completely reversed. This is great news for investors!

 

S&P 500 Daily Chart

 

 

On the other hand, things are a bit different in Japan and China. The Nikkei
225 in Japan has hit a fresh 34-year high, while the Hang Seng in China is
experiencing ongoing weakness. Why is this happening? Well, it all boils
down to a battle between the Federal Reserve (Fed) and the financial
markets. The Fed is trying to talk down interest rates, but the markets are
expecting rate cuts. As a result, the Fed has had some success in lowering
rate cut expectations, but the overall sentiment in the market remains
positive.

 

One interesting thing to note is that there is currently a "Fed blackout
period," which means that there will be no speeches or comments from Fed
members ahead of the FOMC meeting on January 31st. So, we can expect a
quieter period of news related to the Fed.

 

Moving on to different markets, let's talk about the US dollar. It has been
trading around a 50% retracement level, with the 200-day and 50-day moving
averages acting as important levels of support and resistance. The major
event for the dollar during this week will be the US Core PCE, which is the
Fed's preferred measure of inflation. This could have an impact on the
dollar's performance.

 

Next, let's discuss the Eurodollar. It has been trading within small ranges
and is supported by the 200-day simple moving average. The German and
Eurozone PMIs, as well as the ECB monetary policy meeting, could be key
factors influencing the Eurodollar in the coming week.

 

There have been some interesting developments with cable (GBP/USD) as well.
It has been trading within tight ranges, but if it breaks above a certain
level, we could see it move higher. Cawley mentions a bullish indicator
called the 50-day, 200-day moving average crossover for cable.

 

 

 

 

 <mailto:info at bulls.co.zw> 

 

 

 

 

Commodities Markets


Gold price sticks to modest intraday gains, upside potential seems limited

Gold price (XAU/USD) regains positive traction on Tuesday and climbs to the
$2,030 area, back closer to the overnight swing high heading into the
European session. The conflict in the Middle East is showing no signs of
easing, which, along with worries about a slowing economic recovery in
China, benefits the safe-haven precious metal. Apart from this, a modest US
Dollar (USD), weighed down by a softer tone around the US Treasury bond
yields, turns out to be another factor lending support to the commodity. 

 

Any meaningful appreciating move for the Gold price, however, still seems
elusive amid reduced bets for an early interest rate cut by the Federal
Reserve (Fed). The incoming US macro data suggested that the economy is in
good shape and gives the Fed more headroom to keep interest rates higher for
longer. Furthermore, the recent hawkish comments by several Fed officials,
noting that it was too early to consider interest rate cuts, forced
investors to scale back their expectations for a more aggressive policy
easing in 2024. 

 

 

This, in turn, should act as a tailwind for the Greenback and cap the upside
for the non-yielding Gold price. Traders might also refrain from placing
aggressive directional bets around the Gold price ahead of this week's
release of the flash global PMIs on Wednesday and the key central bank event
risk – the European Central Bank (ECB) meeting on Thursday. Investors this
week will also confront the release of the Advnace US Q4 GDP print and the
US Core PCE Price Index on Thursday and Friday, respectively. 

 

This crucial US inflation data will play a key role in influencing market
expectations about the Fed's future policy decisions. This, along with fresh
developments surrounding the Israel-Hamas war, should provide some
meaningful impetus to the Gold price. Nevertheless, the aforementioned
fundamental backdrop suggests that the path of least resistance for the
XAU/USD is to the downside. Hence, any subsequent move up might still be
seen as a selling opportunity and runs the risk of fizzling out rather
quickly. 

 

Daily Digest Market Movers: Gold price draws support from geopolitical
tensions, reduced Fed rate-cut bets to cap gains

The risk of a further escalation of conflicts in the Middle East, along with
China's economic woes, assists the safe-haven Gold price to regain some
positive traction on Tuesday.

The US and UK have conducted a fresh series of joint air strikes against the
Iran-backed Houthis in Yemen, who have been targeting commercial vessers
passing through the Red Sea.

Pakistan and Iran have decided to resolve their issues with diplomacy, while
the Israel-Hamas conflict is threatening to erupt into a large-scale war and
impact the global economy.

Investors continue to scale back their expectations for a more aggressive
policy easing by the Federal Reserve in the wake of signs that the economy
is still in good shape.

The current market pricing indicates a 40% chance of a March rate cut, down
from as much as 80% a week ago, and five 25 bps rate reductions for 2024 as
compared to six two weeks ago.

The yield on the benchmark 10-year US government bond holds just below the
highest level since December touched last week and acts as a tailwind for
the US Dollar, capping the XAU/USD.

The Bank of Japan, as was widely expected, decided to maintain the status
quo and leave its ultra-loose monetary policy settings unchanged at the end
of the January meeting this Tuesday.

Traders now look to the European Central Bank (ECB) meeting, which, along
with the global PMIs, the Advance US Q4 GDP and the US Core PCE Price Index,
for a fresh impetus.

Technical Analysis: Gold price needs to break through the $2,040-2,042
barrier for bulls to seize control

>From a technical perspective, any subsequent move up beyond the $2,030 area
is likely to confront stiff resistance near the $2,040-2,042 supply zone.
The latter should act as a key pivotal point, which if cleared decisively
could trigger a short-covering rally. The Gold price might then climb to the
$2,077 area before aiming to reclaim the $2,100 round-figure mark.

 

On the flip side, the overnight swing low, around the $2,017-2,016 region,
now seems to protect the immediate downside ahead of the $2,000
psychological mark, or over a one-month low touched last week. A sustained
break below the latter could make the Gold price vulnerable to accelerate
the fall towards the $1,988 intermediate support. The downward trajectory
could extend further towards the 100-day Simple Moving Average (SMA),
currently around the $1,972 area and the 200-day SMA, near the $1,964-1,963
zone.

 

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against
listed major currencies today. US Dollar was the strongest against the
Japanese Yen.

 

 


 

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
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for guideline purposes only and sourced from third parties.

 

 	

 

 

 	

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