Bulls n Bears Daily Market Commentary : 04 March 2024

Tue Mar 5 08:46:14 CAT 2024

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Bulls n Bears Daily Market Commentary : 04 March 2024

 <mailto:sales at dulys.co.zw?subject=Request%20Quote> 
ZSE commentary

ZSE retreats in week opening session

The ZSE market retreated 0.27% in week opening session to 521,101.97pts as
all the four indices under our review closed in the red. The Blue-chip index
lost 0.36% to 232,468.22pts while, the Agriculture index closed 0.94% lower
at 1,414.04pts. The Mid-Cap index fell by 0.03% to 2,116,438.08pts. Milk
processor Dairibord Holdings Limited led the laggards of the day on a 9.55%
slid to $950.2894 while, Ariston trailed on a 4.50% loss to $67.5306.
Proplastics and FBC holdings declined a similar 2.78% to close at
$1,300.3049 and $2,800.0000 respectively. First Mutual Properties capped the
top five worst performers of the day on a 1.69% drop to end the day pegged
at $580.0000. Zimbabwe Newspaper Limited headlined the top performers of the
day on a 66.67% jump to $100.0000. ART surged 14.21% to $217.000 followed by
Rainbow Tourism group that added 3.36% to $380.0000. Meikles Limited charged
1.34% to end the day pegged at $2,455.0000. Nampak completed the winners of
the day on a 1.02% uplift to $495.0000.   The market closed with a negative
breadth of five after ten counters recorded gains against fifteen that
faltered.

Activity aggregates enhanced in the session as volume traded increased by
90.37% to 1,830,200 shares while, value traded ballooned 65.11%  to $2.8b.
The top volume drivers of the day were OK (26.45%), Star Africa (15.46%) and
Econet (12.65%). The trio of Delta, Econet and OK Zim dominated the turnover
category as they claimed a combined 64.33% of the total. Datvest ETF
advanced 0.32% to $19.5114 while, MIZ ETF soared 10.53% to settle at
$21.0000. Cass Saddle  ETF and OMTT ETF eased 0.12% and 1.55% to close at
$7.5808 and $90.0068 respectively. A total of 387,800 units exchanged hands
on the REIT section.  Tigere REIT shot up 18.95% to settle at $628.9510
while, Revitus REIT slipped 1.41% to close at $552.1053.-efe

Global Currencies & Equity Markets

South South Africa

South African rand firms ahead of local GDP figures

(Reuters) - South Africa's rand firmed on Monday, ahead of gross domestic
product (GDP) figures and a whole-economy purchasing managers' index (PMI)
survey.

At 1514 GMT, the rand traded at 19.02 against the U.S. dollar , about 0.4%
higher than its closing level on Friday.

The dollar was last down 0.08% against a basket of global currencies.

Statistics South Africa will release fourth-quarter GDP figures on Tuesday,
which are expected to show growth after the economy recorded a minor
contraction in the third quarter of last year.

-

Investor focus will also be on the S&P Global South Africa PMI out on
Tuesday, which will shed light on business conditions in Africa's most
industrialised economy in February.

Gold and forex reserves and current account data will also be released later
this week.

Shares on the Johannesburg Stock Exchange ended slightly lower, with the
blue-chip Top-40 index (.JTOPI), opens new tab closing down 0.24%.

South Africa's benchmark 2030 government bond slipped marginally, with the
yield up 1 basis point at 10.120%.

Nigeria

Naira depreciation worsens Nigeria’s foreign debt woes

The depreciation of the naira has caused the country’s foreign loans to
balloon, writes EDIDIONG IKPOTO

Nigeria’s external debt stock (debt owed to foreign entities) has increased
by N28tn due to the devaluation of the Nigerian naira against the United
States dollar, findings by The PUNCH reveal.

According to the latest debt profile data published by the Debt Management
Office, Nigeria’s total debt stood at N87.38tn at the end of the third
quarter of 2023.

The total external debt constituted N31.98tn ($41.5bn) owed to foreign
entities, which included loans from financial agencies, Eurobonds, and
syndicated loans, among others.

A breakdown of the data showed that Nigeria’s external debt spans across
multilateral loans owed to the likes of the International Monetary Fund
($2.8bn), International Development Association ($14bn), African Development
Bank ($1.6bn), Int’l Bank for Reconstruction and Devpt ($488m).

They also include bilateral loans such as the $4.8bn owed to the Exim Bank
of China and $563m owed to the Agence Francaise Development, a $15bn
Eurobond and syndicated loans worth $300m.

Cumulatively, Nigeria’s external debt totalled $41.5bn (N31.98tn) as of
September 30, 2023, the last debt profile data published by the DMO.

According to the DMO, the Central Bank of Nigeria’s official exchange rate
of $1 to N768.76 as of September 30, 2023, was used in converting external
debt to naira.

However, with the continued devaluation of naira in the last six months,
Nigeria’s external debt has increased significantly.

Much of the damage incurred by the naira began in the early exchanges of
2024, with the apex bank accusing currency speculators of fuelling the free
fall of the local currency.

Between Jan 1, 2024, and the close of trading on February 29, 2024, the
naira has fallen from 891/$ to 1,609/$, representing a decline of 80.58 per
cent.

This also implies that between the September 30 exchange rate of 768/$
(which captures the rate used in the DMO’s calculation) and the current rate
of 1,609/$ as of Thursday, the naira has depreciated by over 109 per cent,
the implication being that Nigeria’s external debt has increased by over 109
per cent between the period when the DMO published the last debt stock
information and February 2024.

The significant rise (in naira terms) of Nigeria’s foreign debt comes amid
plans by the Federal Government to raise more funding through borrowing.

At a World Bank/International Monetary Fund Annual meeting in Marrakech,
Morocco, last year, the Minister of Finance and Coordinating Minister of the
Economy, Wale Edun had confirmed that the government was in talks with the
World Bank for a $1.5bn budget support loan.

The minister said the new World Bank loan would be used to finance
development, disclosing that the facility would be disbursed to Nigeria very
soon.

He said, “On the talks with the World Bank on $1.5bn budget support that is
correct. The World Bank is the number one multilateral development bank
helping developing countries or funding developing countries, projects and
programmes, and sectors.

“It has free money through the International Development Association. It is
for the poorer countries and right now, I think we qualify as one of the
countries that can borrow from the normal window of the World Bank funding,
but also some concessionary IDA funding; and that means that effectively,
the interest rate will be zero.”

Nigeria’s continuous recourse to borrowing comes despite warnings by experts
and global lenders against the dangers of over-reliance on debt for
development needs. These include the International Monetary Fund, which
projected that “the Nigerian government may spend nearly 100 per cent of its
revenue on debt servicing by 2026”.

The World Bank also warned that the country’s debt, while seemingly
sustainable, is “vulnerable and costly”.

The Nigerian Economic Summit Group, a body of private sector leaders, warned
against what it saw as the prospect of creating “a debt burden for future
governments”.

Debt sustainability concerns

In its Annual National Market Access Country Debt Sustainability Analysis
(2022), which included projections for 2023 through 2025, the Debt
Management Office said that its Medium-Term Debt Management Strategy targets
70:30 domestic and external debt composition. As of September 2023, Nigeria
had already exceeded that projection by 6.3 per cent.

With the significant depreciation of the local currency recorded between
September 2023 and February 2024, experts had predicted that the DMO’s
threshold for external-local debt was expected to widen.

While speaking with The PUNCH, the President of the Lagos Chamber of
Commerce, Gabriel Idahosa, said it would be ‘impossible’ for Nigeria to meet
its 70:30 public-external debt ratio due to the free fall of the naira.

Idahosa said, “Nobody, not even the DMO, could have predicted the drop in
the value of the naira. Whatever they do in their next report should reflect
reality.”

The DMO, in its MTDS, also advised the prioritisation of concessional and
semi-concessional funding from multilateral and bilateral sources over
market financing in the case of external borrowing.

The alternative or shock scenario of the DMO’s DSA assumed that the fiscal
and monetary conditions and the general operating macroeconomic environment
would deteriorate should the government fail to address the current economic
challenges such as low revenues, subsidy on premium motor spirit and foreign
exchange scarcity.

The inflation rate was projected to maintain an upward trend through 2023
and 2024, leading to higher interest rates and monetary policy tightening.
This outcome, the report said, would lead to a reduction in GDP and a
widening of the fiscal deficit.

In addition, the nominal exchange rate was projected to depreciate to
646.7/$ from

435.57/$ in the Medium Term Expenditure Framework, 2023-2025, while the
interest rate would increase by 200 basis points annually from 2023 to 2027.

With the rapid devaluation of the naira in the last eight months, Idahosa
pointed out that the DMO would have to rejig the metric for calculating its
debt sustainability analysis as the numbers used in the previous report
could no longer hold.

2024 debt servicing projection

In its 2024 Appropriation Bill, the Federal Government budgeted the sum of
N8.25tn. The assumption of the budget was an exchange rate that would hover
somewhere within 800/$.

With the current rate of 1,609/$, this implies that the exchange rate is
almost 101 per cent higher than the Federal Government’s peg, a situation
that has caused worry among experts and private sector stakeholders.

Experts argued that due to the beating the naira had taken recently, the
Federal Government’s plan to spend about N9tn for debt servicing may no
longer be feasible unless the government was able to overshoot its revenue
projections, which seemed unlikely given a recent admission by the
Director-General of the Budget Office of the Federation, Ben Akabueze.

During an interview with The PUNCH, Akabueze attributed the trend of deficit
budgets in recent years to low revenues.

He said, “The key is to generate enough revenue to meet our needs. We are
not currently there.”

On his part, the President of the Nigerian Association of Chambers of
Commerce, Industry, Mines and Agriculture, Dele Oye, expressed worry that
beyond the damage the forex crisis was wreaking havoc on organised
businesses, the government’s budget would become one of the casualties of
the continued naira devaluation.

Oye said, “Even the government, this exchange rate situation has made
nonsense of their budget because all the things they want to do have already
run differently from the figures projected.

“We all know that stability is an important element of business. The
currency issue is a major catalyst behind inflation. It affects planning. It
affects production. Businesses are afraid to produce because when they do,
they cannot recoup to be able to restock. So, if they sell their products at
the current rate, they won’t be able to restock. So, what that means is that
almost all economic activities will come to a standstill.”

Economists speak

In his reaction, Nigeria’s consultant to the ECOWAS Common Investment
Market, Jonathan Aremu, queried the metric through which the Federal
Government concluded to peg the exchange rate for its 2024 budget at 800/$.

According to Aremu, the CBN’s decision to pump more naira into the economy
has largely been responsible for the devaluation of the currency.

He said, “I believe very strongly that if the volume of physical naira that
is available is not much, then the exchange rate will not rise the way it
has. So, the government that is pumping naira into the economy should be
able to account for the fallen currency.

“If there is an increase in the naira that is available and there is no
increase in the dollar from exports, then what do we expect? I think the
best thing they can do is to control the increasing naira that is available,
and I believe the Central Bank has the tools to do that. It is a quantity
theory of money approach.”

He further stated that with the continued devaluation of the local currency,
Nigeria’s external debt would continue to increase in naira terms, a
development which would put a strain on an already ailing economy.

In his recommendation, Aremu urged the government to emphasise creating the
enabling environment for a robust productive sector that would set the stage
for increased non-oil exports and less reliance on imported products.

He warned that if this is not done, Nigeria will find itself holding the
short end of the stick  vis-à-vis the African Continental Free Trade
Agreement, as other countries with better production environments would
outdo Nigeria with products that would have a more competitive edge.

On his part, an economist at Olabisi Onabanjo University, Prof Sheriffdeen
Tella, said the devaluation of the naira would increase Nigeria’s debt in
naira terms, but noted that the government may choose to work around this
bottleneck by servicing its debts from forex reserves as against using its
internally generated revenue.

“The DMO will calculate it using the prevailing exchange rate, and this will
tell us how much we are losing. But if they pay directly from our dollar
account, it won’t be as painful as it would have been if we paid with
naira,” he explained.

According to Tella, the Federal Government may have to start thinking about
a supplementary budget given the damage which has been done to the current
appropriation bill by the naira devaluation.

He added, “This is why at the time of implementing the budget, they talk
about supplementary budget. That is what may happen. The central bank itself
has devalued the naira because coming from 400/$ to a budget based on 800/$,
it has gone beyond them now.”

 <mailto:info at bulls.co.zw> 

Global Markets

Strong U.S. economy sends dollar bears into hibernation

(Reuters) - A stronger-than-expected U.S. economy is buoying the dollar,
frustrating investors who had bet the currency would wilt under a barrage of
interest rate cuts that have yet to materialize.

The dollar index (.DXY), opens new tab, which measures the buck against a
basket of its peers, is up 2.4% year-to-date. Net bets on the dollar in
futures markets swung positive last month for the first time since late
November, Commodity Futures Trading Commission data showed.

Driving the U.S. currency's stubborn strength is a robust U.S. economy that
has made the Fed hesitant to ease monetary policy too quickly and risk an
inflationary rebound.

U.S. gross domestic product grew at a 3.2% annualized rate in the fourth
quarter. By contrast, the eurozone's economy stagnated last year, China
faces a deepening property crisis, and Japan unexpectedly slipped into
recession at the end of 2023.

While the U.S. economy has remained resilient, "there is no significant
evidence Europe and China are picking up," said Thierry Wizman, global FX
and rates strategist at Macquarie, who has become more neutral on the dollar
after his bearish outlook last year. "That's the reason people have had this
change of heart" on the dollar, he said.

The dollar's strength will be tested this week as investors brace for Fed
Chairman Jerome Powell to testify before lawmakers on Wednesday and Thursday
and await U.S. employment data at the end of the week. Signs that the Fed is
sticking with its "higher for longer" messaging on rate cuts or that the
U.S. economy continues to stay strong could support the dollar's rally.

Investors are pricing in some 85 basis points of rate cuts for 2024,
compared to more than 150 basis points they had factored in early January,
futures tied to the Fed's policy rate showed.

Among the dollar bulls is Ugo Lancioni, head of currency at Neuberger
Berman, who is betting on the greenback to continue rising thanks to U.S.
outperformance even though he believes it has grown expensive relative to
other currencies.

"Our call right now is purely a relative growth type of call," he said.

Getting the dollar's trajectory right is important for investors, given the
currency's central role in global finance.

A strong dollar could weigh on the outlook for U.S. multinationals as it
makes it more expensive to convert their foreign profits into dollars, while
also making exporters' products less competitive abroad. About a quarter of
S&P 500 companies generate more than 50% of revenues outside the U.S.,
FactSet data showed.

Dollar strength could also complicate other central banks' efforts to fight
inflation as it makes their currencies cheaper. The European Central Bank,
which concludes its monetary policy meeting on Thursday, has also pushed
back against rate cut talk due to sticky inflation. Signs that the euro
zone's policymakers might further delay easing could boost the euro at the
dollar's expense.

Strategists are still broadly bearish on the dollar, though the dollar's
persistent strength is testing their outlook. While the median forecast
among currency strategists is for the dollar to weaken over the rest of the
year, some 80% believed there was a risk of the dollar exceeding their
target, a Reuters poll showed in February.

Paul Mielczarski, head of macro strategy at Brandywine Global, sees the
dollar's recent rebound as more of a "tactical rally as opposed to a change
in the underlying trend overall."

Mielczarski is encouraged by nascent signs of improving growth outside the
U.S., including strength in the global semiconductor cycle, which benefits
currencies like the Korean won.

Others, however, see more reasons for dollar strength - especially if former
U.S. President Donald Trump gains the upper hand in a presidential
reelection race that has been deadlocked for months.

Analysts at Capital Economics wrote that Trump's proposed tariff increases
could shift the Fed back to a tightening bias on monetary policy and set off
a wider trade war that spurs safe haven demand for the U.S. currency. The
dollar initially rallied after Trump won the 2016 election but fell 10.5%
during his term.

While that may be far off, investors will still likely be hesitant to renew
bearish bets against the greenback, Macquarie's Wizman said.

"I think it's a 'show me' story," he said. "The amount of skepticism on the
part of traders is high."

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold Gold hovers near 3-month peak as eyes on Powell’s testimony

Gold prices steadied near a three-month peak on Tuesday, supported by
subdued U.S. manufacturing and construction spending, as investors awaited
testimony from Federal Reserve Chair Jerome Powell and key jobs data later
this week.

Spot gold

was flat at $2,114.59 per ounce, as of 0423 GMT, hovering around Monday’s
levels of $2119.69 that marked its highest point since Dec. 4. Meanwhile,
U.S. gold futures

edged 0.2% lower to $2,121.60.

London’s gold price benchmark hit an all-time high of $2,098.05 per troy
ounce at an afternoon auction on Monday.

“This rally in gold was triggered by the softer-than-expected U.S. data and
the pullback in real rates... but there has been a general bias to buy dips
and a positive underlying investor sentiment towards gold that has also made
the market vulnerable to the upside,” UBS strategist Joni Teves said.

Data last week showed a further decline in U.S. manufacturing in February,
along with a gradual easing of inflation, while consumer sentiment remained
weak.

Meanwhile, Fed’s Raphael Bostic said on Monday that the bank is under no
pressure to cut rates urgently, highlighting a “prospering” economy and job
market.

Market focus now turns to Fed Chair Powell’s two-day congressional testimony
on Wednesday and Thursday, in a jobs data-heavy week, as investors seek more
clues on the health of the U.S. economy and potential timing of the central
bank’s rate cuts.

Lower interest rates boost the appeal of non-yielding bullion.

The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust’s GLD
holdings

were down 10% from the previous year as of March 4. 

“Even though gold ETFs have continued to sell, the pace of the selling has
been reasonably measured, which suggests these are tweaks to the composition
of the investor portfolio rather than investors losing faith in gold
necessarily,” UBS’ Teves said.

Spot platinum

fell 0.7% to $890.95 per ounce, and palladium

dropped over 1% to $950.13.

“Platinum should regain its luster amid the ongoing substitution of platinum
for palladium and strong auto sales,” analysts at ANZ said in a note.

Spot silver

fell 0.8% to $23.71.

INVESTORS DIARY 2024

Company

Event

Venue

Date & Time

Art

AGM

virtual (escrow platform)

March 7. 2:30

2024 auction tobacco marketing season opens

13 march

Good Friday

march 29

Easter Monday

1 April

Independence Day

April 18

Workers day

1 May

Counters trading under cautionary

CBZH

GetBucks

EcoCash

Padenga

Econet

RTG

Fidelity

TSL

FMHL

ZBFH

Invest Wisely!

Bulls n Bears 

 Invest Cellphone:            +263 71 944 1674 | +27 79 993 5557 

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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.

 (c) 2024 Web: www.bullszimbabwe.com Email: bulls at bullszimbabwe.com Tel: +27
79 993 5557 | +263 71 944 1674

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