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Local Market Commentary
- Over the weekend, Zambia received a batch of China’s Sinopharm vaccines as part of the countries basket of coronavirus vaccines. Ac-cording to a Chinese envoy, the donation was another important embodiment of the all-whether friendship and unity of the two gov-ernments and peoples in fighting the pandemic. The donation by China will further bolster Zambia’s fight against the coronavirus pan-demic.
- Meanwhile, President Lungu has declared Friday 13 August as a public holiday in order to allow a smooth completion of the electoral pro-cess. Note, Zambia’s head to the polls on Thursday in what is expected to be a closely fought election between President Lungu and main opposition UPND leader Hakainde Hichilema. Incumbent President Lungu of the ruling Patriotic Front (PF) will be seeking a final term in office, having served out the remainder of ex-President Sata’s term from 2015-16 (after his predecessor died in office) and winning re-election in 2016. Meanwhile, long-time opposition leader Hakainde Hichilema will be contesting his sixth and final race, having promised to retire from politics if he is again unsuccessful. The last two elections in 2015 and 2016 both pitted Lungu against HH, and both were decid-ed by a razor-thin margin.
- Yesterday, mining companies were forced to turn to emergency diesel-generated electricity to sustain operations after a power blackout hit Zambia. In a statement released by ZESCO, the SOE noted that it has experienced a system failure and was working to ensure “all sys-tems are restored as quickly as possible.” At Konkola Copper Mines, a spokesman said that the company had been affected by the power outage, although production at Nchanga smelter continued after generators were switched on.
- It will be a slow start to the week with some public holidays on Monday and Tuesday elsewhere in the world to keep trading volumes a lit-tle thinner. That being said, the U.S. is not on holiday, and some focus will turn to the passage of the infrastructure bill and whether or not the bipartisan portion of the deal can be finalised and implemented. There is scope for that to take place either today or tomorrow. This will be the bill with the least amount of resistance, given its bipartisan nature. In the future, the Democrats will have to rely increasingly on its simple majority.
- Whether the economy requires as much boosting as the Democrats believe that it does is debatable. The payrolls data is now coming good and produced a stronger than expected result to give rise to speculation that the Fed will indeed bring forward the timing of its ta-per. Whether that can take place before the end of the year or be postponed until 2022 will depend to some degree on the inflation tra-jectory.
- Looking at the week ahead, there will not be much in the way of data to offer fresh perspective on either growth or inflation, other than maybe the Michigan consumer sentiment index. However, there will be some Fedspeakers that will attract some attention and which could offer some market-moving guidance.
- Shifting to the FX market, the Kwacha is expected to trade on the front foot next week amid increased hard currency flows and buoyant copper prices. Meanwhile, it was all a rather predictable response to some stronger than anticipated payrolls numbers released on Friday that gave rise to speculation that the Fed may be forced into tapering sooner than initially thought. With jobs availability outstripping worker supply, there are fears that inflation may gain in strength as the economy steadily recovers and the true state of the labour mar-ket is better understood. Bond yields have started to rise once more on the back of the data and this should help support the USD.
Rand and International FX Commentary
- Note, South African financial markets are closed today on account of the National Women’s Day public holiday.