Bulls n Bears Daily Market Commentary : 27 May 2024

Tue May 28 09:01:57 CAT 2024

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Bulls n Bears Daily Market Commentary : 27 May 2024

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

ZSE records gains in week opening session...

The ZSE market recorded gains in the week opening session as the All-Share
Index firmed up 1.25% to 100.72pts while, the Blue-Chip Index added 2.66% to
101.9lpts. Contrastingly, the Agriculture Index lost 4.11% to 89.30pts
while, the Mid Cp Index eased 1.31% to 98.94pts. Telecoms giant Econet
headlined the top performers of the day on a 14.43% jump to $2.0645,
followed by Star Africa that surged 12.93% to close at $0.0082. Fintech
group Ecocash Holdings surged 7.88% to $0.1764 while, Proplastics ticked up
3.86% to close at $0.4355. Banking group ZB financial Holdings completed the
top five winners of the day on a 2.70% uplift to settle at $1.9000. On the
contrary, sugar processor Hippo led the laggards of the day on a 15.00% drop
to $3.4000 while, retailer OK ZIM tumbled 14.90% to settle at $0.3830. Art
slipped 8.88% to $0.0811 while, tea processor Tanganda retreated 8.23% to
close at $1.7000 on scrappy 900 shares. Nampak completed the top five
fallers of the day on a 5.00% decline to $0.3800. The market closed with a
positive breadth of one after nine counters recorded gains against eight
that faltered.

Activity aggregates enhanced in the session as volumes traded ballooned
2,118.68% tol_ .lSm shares while, value traded

grew 147.97% to $2.67m. Econet anchored today's activity after contributing
53.82% to the total volume traded and 45.25% to turnover. Other notable top
value drivers of the day were Delta (35.16%), NMB (8.79%) and ZBFH (4.03%}.
In the ETF section, Cass Saddle traded 1.22m units flat at $0.0080 while,
OMTI ETF fell 0.35% to $0.1095. The Tigere REIT dropped 9.01% to $0.5914
after 33.21m units exchanged hands in the opening session. The Revitus REIT
eased 0.01% to end the day pegged at $0.2200.-efesecurities

 <mailto:info at bulls.co.zw> 

Global Currencies & Equity Markets 

Nigeria

Naira falls, external reserves dip despite FX reforms 

Nigeria's bold foreign exchange reforms under President Bola Tinubu have not
yielded the results many expected, with critics faulting implementation.

The naira has weakened 65 percent against the US dollar at the official
market in one year of Tinubu's administration, after two defacto
devaluations by the Central Bank in its push towards a market-determined
rate.

Data compiled from the FMDQ Securities Exchange Limited showed that the
value of the naira fell to N1,339 per dollar as of May 27, 2024 from N463
quoted in May 2023.

Olusegun Obasanjo, former Nigerian President and one of the critics of
President Tinubu's reforms, said the latter's removal of petrol subsidy and
the unification of FX windows were wrongly implemented.

"Today, the government has taken three decisions, two of which are necessary
but wrongly implemented and have led to the impoverishment of the economy
and of Nigerians," Obasanjo said.

"These are the removal of subsidies, closing the gap between the black
market and official rates of exchange and the third is dealing with a
military coup in Niger Republic," Obasanjo said in a statement Sunday.

At the parallel market, popularly called black market, the naira has in the
past one year depreciated by 49.47 percent as the dollar was quoted at
N1,500 as against N758/$1 in April 2023.

The naira had initially rallied after the CBN settled foreign exchange
obligations owed to manufacturers and local banks and enthroned a more
transparent pricing of the naira.

The CBN's hawkish stance on interest rates which has led to a combined 750
basis points hike this year alone helped narrow the negative real return on
naira investments and lure foreign inflows, but has fallen short of taming
inflation which is at a 28-year high.

Nigeria's external reserves also declined in period, sliding 7.21 percent to
$32.763 billion on May 22, 2024.

The pressure on external reserves arises from several factors such as high
demand for foreign currency to meet goods imports and service payments,
limited investment inflows due to weak confidence, and limited inflows from
crude oil sales due to oil theft.

"For years, the currency exchange was not allowed to move to reflect the
difference in US and Nigeria's inflation rate," Charlie Robertson, head of
Macro Strategy, FIM Partners UK Limited, said in an email response to
BusinessDay.

According to him, when economic reality became unavoidable, Nigeria suffered
an extreme currency move.

"This has been tough for Nigeria, because unlike Egypt, or probably Ethiopia
in coming months, Nigeria did not have the backstop of an International
Monetary Fund (IMF) programme, which might have eased the shock," Robertson
said.

"Nigeria's determination to act alone means the road is harder, but the
right policies have been enacted to improve the situation. The cheap
competitive naira will improve the current account and FX liquidity will get
better, helping the naira to recover and meaning external reserves should
grow," Robertson said.

Chinazom Izuora, senior associate, Parthian Securities, said the decline of
the naira over the last year is multifaceted but not unrelated to the
decline recorded in the external reserves.

"The unification of the foreign exchange rates by the President Tinubu
administration was well intentioned and the consensus opinion is that it was
the right thing to do, the main challenges have been policy implementation
and change management," she said.

She noted there were gaps in stakeholder engagement, pre-implementation
enlightenment, alignment of policy initiatives and agencies, and ensuring
structural and systemic cohesiveness.

In the case of the unification of the exchange rates, various economic
commentators have highlighted the issue of foreign currency supply without
which they say will continue to ensure the exchange rate is volatile.

The issue of foreign currency supply and the improvement of the market
structures and systems should have been completed and adequate time given to
enlighten the market operators, stakeholders and the public of the policy
and its implications before implementation.

"The lack of proper project management, in this case - a smooth rollout,
unfortunately leads to what are often over-reactions by the public which has
driven a lot of the volatility we've seen in the FX market this year,"
Izuora said.

Some of the foreign exchange reforms implemented by the CBN include
unification of exchange rates window, liberalisation of FX market, clearing
of FX backlog obligations to banks and airlines, introduction of Price
Verification System (PVS), limits on banks Net Open Position, Lifting the
daily cap of N2 billion on remunerable Standing Deposit Facility (SDF) and
reform of the BDC segment.

Other measures include removal of all limits on margins for the
International Money Transfer Operator (IMTO) remittances; introduction of a
two-way quote system and the broad reforms in the Bureau De Change (BDC)
segment of the market to restore stability, enhance transparency, boost
supply, and promote price discovery in the Nigeria Autonomous Foreign
Exchange Market.

President Bola Tinubu wasted no time in announcing there would be a thorough
monetary house cleaning after he assumed office on May 29, 2023.

Days after his assuming office, he suspended the embattled former governor
of the Central Bank, Godwin Emefiele, whose unorthodox monetary policy had
been widely criticised. Emefiele's suspension followed an investigation into
his office and money laundering accusations.

Tinubu appointed Olayemi Cardoso as the CBN Governor, in September 2023
after the resignation of Folashodun Shonubi, who acted as CBN governor since
the suspension of Emefiele. All the deputy governors of the CBN under the
former governor also resigned.

Since assuming office in September 2023, Cardoso has introduced new policies
and adjusted some existing ones to address FX demand pressure, increased
dollar supply and to stabilise the Naira.

South Africa

South African rand steady as focus shifts toward elections, rate decision

(Reuters) - South Africa's rand was little changed early on Monday at the
start of a packed week headlined by the national election and also featuring
an interest rate decision and a slew of other economic data releases.

At 0715 GMT, the rand traded at 18.4325 against the dollar ZAR=D3, not far
from its previous close of 18.4250.

South Africans vote in national and provincial elections on May 29, with
market participants eager to learn whether the governing African National
Congress would lose its parliamentary majority for the first time since the
end of apartheid in 1994.

"The local currency has managed to hold below the key 18.50 technical level
for now, but with the election on Wednesday, we could still see some
volatility and a possible break above," said Andre Cilliers, currency
strategist at TreasuryONE.

The South African Reserve Bank will announce its latest monetary policy
decision on Thursday, a day after the election.

Monthly producer inflation, trade and budget balance data are also due this
week.

On the stock market, the Top-40 .JTOPI index was up 0.3% in early trade.

South Africa's benchmark 2030 government bond ZAR2030= was weaker, with the
yield up 4.3 basis points to 10.578%.

 <mailto:info at bulls.co.zw> 

Global Markets

Australian Dollar remains tough, while US Dollar depreciates ahead of
looming US PCE

The Australian Dollar (AUD) continues to strengthen against the US Dollar
(USD) for the third consecutive session on Tuesday, despite the softer
Australia's Retail Sales (MoM), which rose by 0.1% in April, reversing the
previous 0.4% decline. This growth fell short of market expectations of
0.2%.

The AUD's strength is also reinforced by an improved risk appetite.
Furthermore, the latest Reserve Bank of Australia (RBA) meeting minutes
suggested that the board found it challenging to predict future changes in
the cash rate, noting that recent data increase the likelihood of inflation
remaining above the 2-3% target for an extended period.

The US Dollar (USD) continues to lose ground following the decline in the US
Treasury yields. The US Dollar Index (DXY), which measures the value of the
US Dollar against the six other major currencies, trades around 104.50 with
2-year and 10-year yields on US Treasury bonds standing at 4.94% and 4.46%,
respectively, by the press time.

According to the CME FedWatch Tool, the probability of the Federal Reserve
implementing a 25 basis-point rate cut in September has decreased to 44.9%,
down from 49.6% a week earlier. On Tuesday, several US Federal Reserve (Fed)
officials are scheduled to speak, including Fed Governor Michelle Bowman,
Cleveland Fed President Loretta Mester, and Minneapolis Fed President Neel
Kashkari.

Daily Digest Market Movers: Australian Dollar appreciates due to risk-on
sentiment

China's Shanghai has announced measures to support the property sector,
including reducing down payment requirements and lowering minimum mortgage
rates. Additionally, China launched a US$47 billion state-backed fund on
Friday to strengthen its semiconductor industry. Any economic changes in
China could significantly impact the Australian market due to the close
trade relationship between the two countries.

University of Michigan's 5-year Consumer Inflation Expectations for May on
Friday, eased slightly to 3.0%, below the forecasted 3.1%. Despite the
upward revision of the Consumer Sentiment Index to 69.1 from a preliminary
reading of 67.4, it still marked the lowest level in six months.

The US Census Bureau released Durable Goods Orders on Friday, showing a
solid recovery in April with a 0.7% month-over-month increase, compared to
the forecasted 0.8% decline. However, March's figure was revised down to
0.8% from the initial estimate of 2.6%.

On Thursday, Australian Consumer Inflation Expectation of future inflation
over the next 12 months fell to 4.1% in May from 4.6% in April, marking the
lowest level since October 2021.

The S&P Global US Composite PMI surged to 54.4 in May, marking the highest
level since April 2022. The Service PMI rose to 54.8, indicating the biggest
output growth in a year, while the Manufacturing PMI increased to 50.9.

Technical Analysis: Australian Dollar moves above the major level of 0.6650

The Australian Dollar trades around 0.6660 on Tuesday. Analysis of the daily
chart indicates a bullish bias for the AUD/USD pair, as it is positioned
within a rising wedge. The 14-day Relative Strength Index (RSI) is slightly
above the 50 level, further confirming this bullish bias.

The AUD/USD pair could potentially reach a four-month high of 0.6714,
followed by the upper limit of the ascending triangle around 0.6730.

On the downside, the 21-day Exponential Moving Average (EMA) at 0.6618
serves as key support, followed by the psychological level of 0.6600. A
further decline could put downward pressure on the AUD/USD pair, potentially
driving it toward the throwback support region at 0.6470.

 <mailto:info at bulls.co.zw> 

Commodities Markets

Gold price stays strong yet hovers at around $2,350

Gold price rises close to 1% after bouncing off two-week low of $2,325.

Strong US economic data dampens hopes for Fed easing, pressured Gold prices
last week.

Fed officials indicate longer timeline to achieve 2% inflation target,
impacting Gold's appeal.

Upcoming US PCE Price Index anticipated to report a core increase of 2.8%
YoY and headline growth of 0.3% MoM.

Gold price is up on Monday amid thin trading due to holidays across both
sides of the Atlantic, particularly the UK and the US. The yellow metal
bounced off two-week lows of $2,325, as US Treasury yields finished the last
week down, while the Greenback weakened across the board.

The XAU/USD trades at $2,354 on Monday, gaining close to 1% at the time of
writing.  Solid economic data from the United States (US) hurts market
participants' hopes that the Federal Reserve (Fed) will ease monetary policy
this year. Consequently, this undermined the non-yielding metal, which
tumbled by more than 3% last week.

Fedspeak weighed on Gold prices as officials acknowledged it would take
longer than previously thought to curb stickier inflation to the Fed's 2%
core inflation goal. Although the golden metal is considered a hedge against
inflation, higher US Treasury yields sponsored the last leg down of XAU/USD.

UBS analysts chimed in, "We expect gold prices to stay volatile and price
setbacks to be shallow, targeting Gold prices to test new record highs later
this year."

A scarce macroeconomic calendar during the week is expected to reveal
April's Personal Consumption Expenditures (PCE) Price Index, the Fed's
favorite inflation gauge. Estimates suggest the core reading will print at
2.8% YoY, while headline PCE is foreseen edging higher to 0.3% MoM.

Daily digest market movers: Gold price rises amid weak US Dollar

Gold prices are boosted by the decline in US Treasury yields and a softer US
Dollar.

US 10-year Treasury note is yielding 4.461% and loses one-and-a-half basis
points, undermining the Greenback. The US Dollar Index (DXY), which tracks
the buck's performance against a basket of peers, trades at 104.58, down
0.15%.

US economy continues to fare well, as evidenced by last week's S&P Global
PMIs, which highlighted increased business activity. However, investor
uncertainty about the economic outlook persists due to a worse-than-expected
US Durable Goods Orders report released on Friday.

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%."

BBH analysts commented that since the latest Beige Book released on April
17, the US inflation has remained sticky despite some signs of softening in
the labor market. They added, "We expect a balanced tone in this report that
will allow the Fed to take a wait and see approach with regards to easing."

Fed funds rate futures estimate just 25 basis points of interest rate cuts
in 2024, according to data provided by the Chicago Board of Trade (CBOT).

Technical analysis: Gold price clings to gains above $2,330

Gold price uptrend remains intact despite retreating below the $2,400
figure. Buyers are gathering traction as depicted in the Relative Strength
Index (RSI) indicator, which has turned bullish, hinting that higher prices
lie ahead.

If XAU/USD clears $2,350, that would expose the $2,400 mark. Further gains
lie overhead as buyers target the year-to-date high of $2,450, followed by
the $2,500 mark.

On the other hand, if bears keep the XAU/USD price below $2,350, they need
to push prices below the May 8 low of $2,303. Once surpassed, the May 3
cycle low of $2,277 would follow.

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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