Currency risk on mood to persist. As currency market risk on mood persist in emerging and frontier space, the Kwacha is expected to extend its losing streak trading north of 15.5 for a dollar unit. Driving this will be pockets of disinvestment risk taking a cue from global risk sentiment and the skew towards safer bets as coronavirus infects financial markets. Market nervousness will be a key theme week until emergency response plans are vivid in emerging and frontier markets as Covid-19 pandemic fears grip Africa after cases were reported in Nigeria and Kenya. Kwacha remains vulnerable. The Kwacha is very…
Author: The Editor
As global appetite for risky assets sharply waned, more and more players are seeking refuge in safe haven bets such as US treasuries and bullion in the wake of the coronavirus pandemic. One such assets are Kwacha bonds that recorded a dismal performance in the second debt sale of the year. The Bank of Zambia sold K257.5million in 3,5 and 10 year bonds of the K1.1billion on offer. Appetite was fairly anemic at slight over half a yard of which K426.9million was absorbed in nominal terms. Yields were fairly flat with the sweetest point on the fixed income curve, the…
The currency is Africa’s red metal hostspot Zambia is feeling coronavirus pandemic effects as asset sell-off pressure builds in Africa with a reported case in Nigeria. Global markets are bearing the brunt of the Covid-19 virus as more and more players flee risky assets to seek haven in safer bets such as gold and US treasuries. This has seen the worst impact on financial markets since the 2008 financial crisis. Emerging and frontier markets have been experienced disinvestment pressure as more and more fund managers exit emerging market positions fleeing to traditional safer haven assets such dollar denominated bonds and…
Treasury bills in Africa’s second largest copper hotspot Zambia just got 140 basis points unattractive in real terms when February annual inflation rate spiralled to 13.9% from 12.5% in January. The February headline CPI narrowed the compensation premium for market players with high affinity for risk in government paper. The copper producer grapples with rising energy risks and a depreciation currency whose effects, the business ecosystem has borne the brunt of to ebb selling prices higher. (Inflation erodes purchasing power. The difference between government yields and inflation represents the premium above which investors are compensated for taking risk in sovereign…
Treasury bills in Africa’s second largest copper hotspot Zambia just got 140 basis points unattractive in real terms when February annual inflation rate spiralled to 13.9% from 12.5% in January. The February headline Consumer Price Index (CPI) narrowed the compensation premium for market players with affinity for risk in government paper. The copper producer grapples with rising energy risks and a depreciation currency whose effects, the business ecosystem has borne the brunt of to ebb selling prices higher. Appetite for shorter dated higher yielding assets. In the fifth treasury bill sale of the year held on 27 February, the Bank…
Global ratings agency Standards and Poor’s (S&P) on 21 February lowered Zambia’s long term issuer risk rating to ‘CCC’ from ‘CCC+’ with negative outlook while revising its Transfer and Convertibility (T&C) risk profile a notch lower to CCC. This followed rising debt repayment risks especially after flashing on the African Development Bank (AfDB) watchlist for $1.4million in December 2019. The copper producers macrofiscal environment wobbles with rising debt and other related balance sheet vulnerabilities manifesting in rising government security yields, fiscal deficit widening and currency weakness. Read also: S&P downgrades Zambia’s sovereign rating to ‘CCC’ from ‘CCC+’ on rising debt…
Standards and Poor’s rating agency on Feb. 21, lowered Zambia’s long-term sovereign credit rating to ‘CCC’ from ‘CCC+’ with negative outlook on account of rising vulnerabilities to debt repayment obligations. Also lowered was the Transfer & Convertibility (T&C) assessment to ‘CCC’ from ‘CCC+’. On the downside, S&P Global see’s the copper producer as being vulnerable to nonpayment of upcoming commercial obligations, for which it could depend on favorable financial and economic conditions. If conditions persist in deterioration the rating agency could revise the rating on Zambia even lower over the next half a year to a full year period. The…
In its first rate decision meeting of 2020, the central bank in Africa’s red metal hotspot stood pat on rates keeping its benchmark rate at 11.5% while leaving the cash reserve requirement at 9%. It is about a dry point of construction that the Monetary Policy Committee is alive to risks to inflation exacerbated by energy risks. However the governor, Dr. Denny Kalyaya echoed need for fiscal sustainability. Fiscal pressures have persisted with preliminary fiscal deficit estimated at 8.2% on a cash basis versus a targeted 6.5%. The 2020 target of 5.5% seems a mirage prima facie given deepening fiscal…
The central bank in Africas red metal producer in its first rate decision meeting has held rates unchnaged at 11.5% for benchmark policy rate and left its cash reserve requirement pat at 9%. Alive to risks to growth fueled by rising energy risks that have driven inflation to 12.5% the governer Denny Kalyalya is cognisant that inflation will remain elevated in the medium term. Read also: Zambia’s central bank expected to keep rates unchanged next week – Pre MPC analysis Inflation based monetary policy. Zambia’s monetary policy is inflation based. Kalyalya noted higher ebbing repricing risks evidenced by an uptick in…
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