Bulls n Bears Daily Market Commentary : 22 May 2024

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Bulls n Bears Daily Market Commentary : 22 May 2024

 

 	

 

 

 	


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

 

Treasury says Old Mutual/PPC standoff to be resolved ‘soon’; ZSE rises

 

HARARE – Finance Minister Mthuli Ncube says the Old Mutual/PPC suspension stand-off is close to being finalised with considerable progress being made.

Ncube said this while responding to the insurance and pensions industry concerns at an engagement meeting this morning.

The sector had requested that government should allow players holding suspended counters to trade them on external bourses to raise liquidity in line with offshore investment guidelines.

In June 2020, Old Mutual Zimbabwe PPC and Seed Co International were suspended from the ZSE amid concerns that the fungibility of the shares was being used to fuel the parallel market. The three were directed to list on the VFEX but only SCI took up the offer.

Capital markets are agreed that Treasury should bring finality to the issue that has inconvenienced investors and has dampened confidence in the market while the reasons for the suspension no longer apply.

The Finance Minister, without giving further details, said they are now closer to a solution and this issue would soon be resolved.   

 

In his official remarks, Ncube said the Ministry is in the process of developing the Financial Sector Development plan as one of the recommendations by the Commission of Inquiry into the Conversion of Insurance and Pensions values from ZW$ To US$.

He also said there was need to bring closure to the issue of the 2009 Compensation. "The Commission of Inquiry was concluded in 2017 and seven years later we are still consulting, debating, colluding, finger-pointing, and making wild actuarial assumptions.”

He added; "As an industry, you are being asked to account for those monetary liabilities that lost value whilst the assets and building that you bought survived notwithstanding geopolitical factors. We need to see traction and unplug the bottlenecks."

However, the industry raised concerns on the Compensation plan saying there some discrepancies in the SI 162 of 2023 (e.g. application of the 3% real return which is divorced from the actual returns earned during the period under review).

They had also noted that the compensation amounts computed are low and won’t meet the reasonable expectations of affected members thereby further denting the industry image.

Acting chair of the industry umbrella body, Willie Chibaya said that government should consider booking a compensation liability in their balance sheet and pay different cohorts of members as they go. “This can be achieved through scaled premium funding over the next 20 to 30 years.”

 

Finance Minister Mthuli Ncube (middle) with Ipec Commissioner Grace Muradzikwa and chairman Albert Nduna

 

Meanwhile, Zimbabwe Stock Exchange shares closed higher with the benchmark All Share gaining 1.30% to 96.87 in relatively improved turnover. Market bias was positive after the session yielded 12 risers against eight fallers.

Turnover closed at ZiG 4.14 million led by Delta at ZiG 2.85 million. Volume was at 1.58 million shares with Zimre Holdings contributing the most at 500 000 shares.  Total trades were at 193, a slight improvement from recent averages while foreign participation was insignificant.

The Top Ten Index rose 1.73% to 95.43. Econet put on 10.73% to 153.51c and smaller gains were seen in Delta and FBC.

EcoCash dropped 1.02% to 17.43c.

The Medium Cap Index added a marginal 0.25% to 99.47.  Willdale led the risers with a 17.33% gain to 2.52c and property stock FMP advanced 10.41% to 35c.

Former heavyweights CFI was 7.69% ahead to 140.05c and Seed Co put on 7.60% to 196.77c. 

 

Nampak was the worst performer with a 9.09% decline to 40c and ZHL was 5.26% lower to 36c. Star Africa dropped 1.30% to 0.69c and Zimpapers pared 1.13% to 3.96c.

On the VFEX, trades in Caledonia and Seed Co International (SCI) boosted turnover which closed the session at US$322 040.95. Total volume was at 939 749 led by SCI at 523 056 with a value of US$115 143.19. Caledonia saw traded value of $109 062 after 6 059 shares exchanged hands.

Zimplow was the weakest link, losing 145 to 1.72 US cents and Seed Co International dropped 1.92% to 22.01 US cents. A small loss was recorded in Innscor.  

 

There were gains in First Capital, which was 3.98% ahead to 2.61 US cents and Simbisa put on 2.28% to 30.96 US cents.

-finX

 

 

 <mailto:info at bulls.co.zw> 

 

 

Global Currencies & Equity Markets 

 

South Africa

 

The rand continues its strengthening trajectory

The rand continued its strengthening trajectory following a brief consolidation during early trade yesterday.

 

By 12.15am the rand was 0.49% stronger at R18.1617.

 

The rand is trading just over 1.6% higher against the greenback for the week, at R18.06/$, while also making strides against the euro and pound to trade at R19.61/€ and R22.96/£.

 

For the second consecutive month, headline inflation, as measured by the Consumer Price Index (CPI), softened – declining to 5.2% year on yeare in April from 5.3% year on year in March - well above the central bank's preferred level of 4.5%.

 

This softening of core inflation was unsurprising, given the subdued demand in the economy, the low exchange rate pass through, and the relatively minor spillovers from elevated fuel and electricity prices.

 

Casey Sprake, an investment analyst of fixed income at Anchor Capital, said, “This latest print means that inflation has moved closer to the 4.5% midpoint of the SA Reserve Bank's target band of 3% to 6%, where it prefers to anchor expectations.”

 

Bianca Botes, a diirector at Citadel Global, said on Wednesday cautious commentary by US Federal Reserve officials this week, driving home the higher-rates-for-longer narrative, had received little attention from the currency markets, with the US Dollar Index trading 1.3% lower over the period of a month.

 

“The FOMC (Federal Open Market Committee) minutes will take centre stage today but are expected to hold little surprise in light of all the recent Fed speak. The data calendar picks up momentum today, in addition to the FOMC minutes we will keep an eye on UK CPI and PPI, local CPI and Chinese FDI (foreign direct investment) all due for release today,” she said.

 

Trading Economics said the JSE index was down for the second day on Wednesday, trading around 79635 points, mirroring a cautious mood across global markets ahead of the publication of the FOMC minutes later in the day.

 

Among single stocks, Redefine was the top loser, shedding over 4%. On the other hand, retailer Pick n Pay led the gains, up nearly 4%, after saying it concluded a debt restructuring agreement with its lenders.

 

BUSINESS REPORT

 

 

Nigeria

 

Naira closes flat at official market after CBN raises rate

The naira on Wednesday closed flat against the dollar at the official foreign exchange (FX) market, a day after the Central Bank of Nigeria (CBN) increased Its benchmark interest rate by 150 basis points to 26.25 percent.

 

After trading on Wednesday, the naira gained marginally by 0.21 percent as the dollar was quoted at N1,462.59, stronger than N1,465.68 quoted on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to the data from the FMDQ Securities Exchange Limited.

 

What this means is that if naira stabilises Imported goods may become cheaper since the purchasing power of the naira increases. This can lead to lower prices for products that Nigeria imports.

 

It also means that investors find the Nigerian currency more attractive due to the higher returns on investments. This can lead to increased foreign investment, lower inflationary pressures, and potentially stronger economic growth, benefiting consumers and businesses alike, said a financial market analyst.

 

The FX market summary released by the FMDQ showed that the intraday high closed at N1,531 per dollar on Wednesday, stronger than N1,549/$1 closed on Tuesday. The intraday low closed steady at N1,401/$1 on the spot trading.

 

Dollar supplied by willing buyers and willing sellers declined by 53.96 percent to $123.45 million on Wednesday from $268.17 million recorded on Tuesday.

 

The naira on Wednesday weakened against the dollar, losing 1.47 percent at the parallel market also, known as the black market.

 

The local currency was quoted at N1,500 per dollar on Wednesday, weaker than N1,478/$1 closed on Tuesday at the parallel market.

 

After it’s two days Monetary Policy Committee (MPC) meeting on Tuesday, the CBN retained the asymmetric corridor at +100/-300 around the monetary policy rate (MPR), retained the cash Reserve Ratio (CRR) of commercial banks at 45.00 percent and kept the liquidity ratio constant at 30.00 percent.

 

 

 

 <mailto:info at bulls.co.zw> 

 

Global Markets

 

Thailand and China ditching the dollar

The central banks of the two nations signed an agreement this Tuesday aiming to strengthen cooperation to facilitate cross-border settlements in local currencies.

 

Not a month goes by without nations taking steps to bypass the dollar in their bilateral trade. India and Nigeria concluded a similar agreement just last week.

 

Dedollarization is a reality and the Russian president emphasized it again during his recent state visit to China. On this topic, don’t miss our article: Putin cuts a dollar short.

 

Little information has emerged on how the two Asian countries plan to facilitate their trade. We do know, however, that Thailand and China are working together on the mBridge project (multiple CBDC Bridge).

 

Some consider this international CBDC transaction project could break the monopoly of the SWIFT network. The project involves the Bank for International Settlements (BIS) and the central banks of China, Hong Kong, Thailand, and the United Arab Emirates.

 

China is concerned that its economy relies on payment networks controlled by the West. Recall that Iran and Russia were disconnected from the SWIFT network. That is to say, two countries openly hostile to the dollar…

 

A redundant system?

Some may wonder why China is working on the mBridge project when it already uses the CIPS (China’s Cross-border Interbank Payment System).

 

The growth of CPIS has been explosive since its launch in 2015. It processed more than 123 trillion yuan in 2023, compared to 10 trillion in 2021 and 2 trillion in 2017. It now connects nearly 1,500 banks in 114 countries.

 

CIPS is not (yet) a threat to the SWIFT network’s monopoly since it is only a yuan payment system. SWIFT is a more global messaging system serving as an intermediary for payment systems linked to national currencies. More than 11,000 banks use SWIFT around the world.

 

The mBridge project aims to create an international payment network in CBDCs that would no longer need a messaging system like SWIFT. Banks would connect directly via their central bank. In China, mBridge is connected to the e-CNY CBDC system.

 

Some US officials fear that the mBridge network will give Beijing an edge in using CBDCs to revolutionize international payments.

 

The US fears that it will allow other currencies to overshadow the dollar, the currency in which half of the approximately 32 trillion dollars exchanged globally each year is denominated.

 

Josh Lipsky, director of the GeoEconomics Center at the American think tank Atlantic Council, said that the fact that mBridge is taking shape under the auspices of the BIS raises eyebrows in Washington. Especially since China is getting rid of the dollar at a record pace.

 

mBridge faces reality

According to two people with direct knowledge of the project, the technological backbone is a blockchain built by the Chinese. It notably uses Ethereum’s Solidity smart contract language.

 

Its goal is to compete with the current system. Payments today happen in two stages: the message and the movement of money. For example, if I want to pay someone in China, my bank must have an account (Nostro) in a Chinese bank and request via a swift message to pay the recipient.

 

Upon receiving the message, the Chinese bank transfers the money to the recipient who is often in another bank. In this case, a national Chinese transfer will be needed, which constitutes a third step.

 

Furthermore, if my bank does not have a Nostro account with a Chinese bank, it will have to send the payment through another bank that has an account in China, incurring additional fees and a fourth step.

 

With mBridge, the promise is that banks will no longer need a bank account in a Chinese bank. Banks would go directly on mBridge to buy e-CNY (yuan CBDC) before transferring them directly to the Chinese recipient’s bank.

 

Eliminating messages means that banks no longer need to hold foreign accounts filled with liquidity, reducing the costs of cross-border payments.

 

Not so fast…

For it to work, exchange rates on mBridge must be very competitive. If not, the savings made on Nostro accounts will be negated.

 

However, competitive exchange rates require significant volumes. This is one of the reasons why the dollar is central to the international monetary system.

 

The greenback has been the global standard since the Bretton Woods agreements, against which all currencies float. That is, when a Peruvian company makes a transfer to a Kazakh client, the conversion does not happen via a Sol/Tenge pair. The sol is first converted into dollars, which will then be converted into tenge.

 

It is therefore hard to imagine how mBridge and low-volume CBDCs could transform international payments.

 

Conversely, Bitcoin is a potential standard already boasting impressive volumes. They accounted for the equivalent of 25 billion dollars over the past 24 hours according to onchainfx.

 

Bitcoin has the immense advantage of being a currency as well as a payment system. Two-in-one. Moreover, it’s a stateless system because it is decentralized. This is a key parameter. Indeed, who says mBridge won’t be used for political purposes as well?

 

Central banks may struggle to maintain control over international transfers, but it’s probably impossible to outperform the technological marvel that is Bitcoin.

 

And given the current intense geopolitical tensions turning into a trade war, the world needs a global payment system immune to political whims more than ever. And not CBDCs…

 

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 <mailto:info at bulls.co.zw> 

 

 

 

 

Commodities Markets

 

 

Gold slumps on hawkish FOMC minutes, hurt rate cut hopes

Gold plunged during the North American session on Wednesday, breaching below the $2,400 barrier, as traders seem to have booked profits ahead of the release of the last Federal Reserve (Fed) Meeting Minutes. Data from the United States (US) showed the housing market continued to show weakness, while Fed officials remained home after a busy week’s start.

 

The XAU/USD trades at $2,392, losing more than 1% after reaching a high of $2,426. US Treasury bond yields are rising following a hotter-than-expected inflation report from the UK, sending US yields higher. US equities are mixed ahead of NVIDIA’s earnings report release, while the Greenback edges up.

 

 

In the meantime, an article by The Wall Street Journal mentioned that Gold rallied due to central bank buying. According to the World Gold Council, central banks in emerging markets added around 2,200 tons of the golden metal since Q3 2022.

 

The article mentioned that the trigger might be Western sanctions on Russia after its invasion of Ukraine.

 

Aside from this, US Existing Home Sales plunged in April from 4.22 million to 4.14 million, or a -1.9 % contraction. Despite that, NAR Chief Economist Lawrence Yun said, “Home prices reaching a record high for the month of April is very good news for homeowners.”

 

Recently, the Fed released its latest meeting minutes, which showed that “Various participants mentioned willingness to tighten policy further should risks to outlook materialize and make such action appropriate.”

 

Daily digest market movers: Gold price falls as US yields climbed following hawkish Fed Minutes

Gold prices tumble sharply as US Treasury yields rise and Greenback advances. The US 10-year Treasury bond yield edges up 2 basis points to 4.434%, while the US Dollar Index (DXY), which tracks the Greenback’s performance against a basket of six other currencies, is up 0.19% at 104.82, a headwind for XAU/USD.

The FOMC Minutes showed that Fed officials remained uncertain about the degree of policy restrictiveness. They added that “it would take longer than previously anticipated to gain greater confidence in inflation moving sustainably to 2%.”

During the week, speeches by Fed officials laid the ground for the “hawkish tilt” of the FOMC’s Minutes, as most officials commented they would like to be certain that inflation is edging down and that they’re not in a rush to lower the fed funds rate.

Data from the Chicago Board of Trade shows investors are expecting 31 basis points of Fed easing toward the end of the year.

Technical analysis: Gold price slides below $2,400 as bears target $2,330

Gold price’s uptrend remains in place, yet Wednesday’s pullback could pave the way to test lower prices. Momentum is shifting negatively as the Relative Strength Index (RS), despite standing bullish, is aiming downwards. With that said, buying pressure is waning as sellers step in.

 

That said, the XAU/USD’s first support would be the May 13 low at $2,332, followed by the May 8 low of $2,303. Once those levels are surpassed, the 50-day Simple Moving Average (SMA) at $2,284 will be up next.

 

On the other hand, if buyers push the Gold price above $2,400, look for a retest of year-to-date highs at $2,450.

 

 

 


 

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 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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