kwacha
Standard Bank which trades in Zambia as Stanbic Bank says the Kwacha is likely to lose the recent gains it has recorded over the past month.

Giving a market outlook for Zambia, the bank says over the past month the African currencies in its coverage have performed fairly well.

It says its index of African currencies continued to appreciate, improving the forex returns.

The bank says global sentiment was also buoyant over the past month, helping to boost emerging market’s currencies noting that the Zambian Kwacha appreciated aggressively.

“At the time of publishing USD/ZMW looked poised to make a run for 9.00 from nearly 11.35 a month ago. Much of this seems to be local banks unwinding long USD positions rather than any material forex inflows. Of course, in a market with subdued forex demand due to tight liquidity conditions, and an illiquid interbank forex market, any forex flows tend to be exaggerated. This may well have been the case with the ZMW,” it said.

It said, “Given the frenetic pace at which African forex has run in the past 2 months or so, we may very well see some reversal in the coming weeks. Certainly the ZMW looks like a good candidate for such reversal.”

The report further notes that there is potentially a chance that USD/ZMW moves lower still before gradually grinding higher.

“Support for ZMW has largely been accomplished through the Bank of Zambia’s (BOZ) tight monetary policy stance, sporadic copper forex inflows and a slowdown in corporate activity, import demand remains constrained in Zambia in line with a general slowdown in economic activity.”

The Standard Bank said the Bank of Zambia recently revised its GDP forecast for 2016 to 3.5% from 5.0% projected late last year.

“Additionally, credit growth has moderated to 29.0% y/y in Feb from 32.5% y/y in Jan.
“Imports declined by 14.1% y/y in USD terms to USD525.3m by Feb. While the imports of capital and intermediate goods remain relatively robust, there has been a more prominent decline in the imports of consumer goods and raw materials,” it noted.

“In any event with Gross Forex reserves at USD2.92bn in Jan 16 which is 4.3 months of import cover) and subdued import demand (at least for now), we expect the currency to remain supported for a while still. Zambia’s Treasury indicated that negotiations on a formal IMF programme will be concluded in Apr 15. While this is encouraging, we suspect that the dissolution of parliament in May ahead of the 11 Aug elections and the possibility of a run-off election could lead to implementation delays,” it said.

The bank said arguably, an improvement in the external sector through a rebound in commodity prices or the authorities’ commitment to a funded IMF programme would see a meaningful change in sentiment toward Zambia and support for ZMW.

“A programme with the IMF would not only boost confidence in Zambia but would probably impose fiscal consolidation on Zambia, restraining imports further and thereby also providing some support to the Kwacha.”

On the mining front, the bank noted that Glencore plans to invest USD1.1bn in its Mopani copper mine during 2016-18.

“This investment will allow the company to sink three shafts at the mine with new technology that will help reduce production costs and extend the mine’s life by more than 25 years.
Meanwhile, following conversations with Zambia’s Chamber of mines, we believe that copper production could remain stagnant this year at around 710k MT recorded in 2015.

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31 COMMENTS

  1. SO WHAT DOES BOZ HAVE TO SAY TO THIS? ANY REAL GAINS ARE SUSTAINABLE GAINS – THAT WAS WHAT MILES AND HH WERE TRYING TO SAY BUT IT APPEARS BOZ HAS ALSO BECOME A PF CARDER TRYING TO GIVE THE PUBLIC UNJUSTIFIED INFORMATION

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    • Non of this crap is sustainable…my explanation is most international organisations whose financial year ended on 31st March are buying kwacha to pay their financial obligations in the local currency. This, coupled with the lack of money in circulation, has caused the kwacha to appreciate. How long will these measures hold? We wait and see.

      What we need in this country is a stable currency, not a currency that fluctuates like a see-saw. This makes planning very difficult for the private sector. Those that want to invest in this economy would rather hold on until some form of stability is achieved. Until Zambia starts exporting or stops importing everyday consumables, we should forget about a strong economy and a strong kwacha.

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    • Furthermore, the government still owes contractors many contractors most of whom are foreign and will obviously and immediately, they are paid, buy dollar and externalize the money an act which will see the kwacha start sliding back to its normal probably at more than 12 kwacha to a dollar. Secondly, the Eurobond payments will need to be made, this will also have an effect on the exchange rate. Thirdly, economic activity will continue being minimal

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  2. am not an economist but even this posting doesn’t point ou the actual dynamics that would cause the kwacha to fall. it still underpins the determining factors to BOZ measures like a squeez on liquidity and recurrent importations. with $2.9m in foreign reserves, new glencore investment and likely rebound in copper prices i still don’t see why zmk cannot hold for more than that long.and aren’t these BOZ measures enough to equal any by imf?i dont see for what we would still need imf prescriptions

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  3. Mr Commentator, leave out the “wise” for you are not. If you read the Standard Bank, you will note one very important element which contradicts your Millimeter Sampa. Among the list of factors which the bank says supports the kwacha appreciation, off loading of forex by BoZ is not one of them or is not prominent. Your Sampa on the other hand thinks off loading forex reserves by BoZ is the real and only/major reason for the kwacha appreciation, a clear case of little knowledge misleading oneself, same as HH. Amateur economists should just keep quiet and not spew out smelly diarrhoea. What is notable from Standard bank opinion is their assessment that the kwacha may fall again, they use the word “may” which is quite professional, I must say, in that it is not conclusive and leaves room…

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    • @”Wise head”:
      First, I suggest you keep quite if have nothing to say rather than come on the platform and make noise.
      Secondly, as Zambian be truth to yourself and our country. Lungu will one day leave office but our country will be damaged. Its a known fact that the Zambian economy under PF and specifically Lungu has been destroyed. Look at our people suffering and struggling to afford anything and you are there happy and supporting people that have caused this and show no discourse in their actions.
      I don’t know about you but I love my country and my people. I fight for best for my country and people. Even HH or Miles if they had to do the same when they get into power I would go against them. Let’s be honest with ourselves and remember we have one home and only us can make…

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  4. What is notable from Standard bank opinion is their assessment that the kwacha may fall again, they use the word “may” which is quite professional, I must say, in that it is not conclusive and leaves room that their assessment may be an error. Now in economics, no two economists have the same opinion.. So the kwacha may continue gaining or stop at some point. My opinion is that the drastic kwacha fall last year was driven more by speculation (including opposition sentiments and rich opposition speculators) than economic fundamentals on the ground, so I think the kwacha is simply trying to restore itself to where it should be, around K7/$ and then it will follow the economic fundamentals, either up or down. Sorry HH, but that is my lesson of economics to you.

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    • @ Mr Foo.lish head
      You are at it again! Does the Kwacha look like the Pula which you worship!!
      You Mr Foo.lish head and other Lungu minions are just after rigging an election by manipulation people’s opinions by feeding them with false hope that their suffering will end soon because economy is doing well going by the falsely appreciating Kwacha!
      No one will buy that after all people are paying K160 per 25kg bag of maize meal. So if the Kwacha is gaining, why is mealie-meal going unaffordable?? PF is going whether you like it or not!!

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    • @”Wise head”:
      First, I suggest you keep quite if have nothing to say rather than come on the platform and make noise.
      Secondly, as Zambian be truth to yourself and our country. Lungu will one day leave office but our country will be damaged. Its a known fact that the Zambian economy under PF and specifically Lungu has been destroyed. Look at our people suffering and struggling to afford anything and you are there happy and supporting people that have caused this and show no discourse in their actions.
      I don’t know about you but I love my country and my people. I fight for best for my country and people. Even HH or Miles if they had to do the same when they get into power I would go against them. Let’s be honest with ourselves and remember we have one home and only us can make…

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  5. Being so assertive in a prediction is a double edged sword. What if the Kwacha continues to appreciate, what are we going to think of Stanbic? We know what has been happening in some banks. Bogus demands for the Dollar are being allowed to distort the Financial Markets to perpetually put the Kwacha on the back foot. This they have been doing in collaboration with such crooked fore casts . The Zambian Economy is so small and just a few people with money working with compromised commercial banks can distort the financial markets. I urge the Bank of Zambia to enhance inspection and supervision of Forex Transactions. Critically Look at the demand coming from some of these banks. Most of them are hollow.

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  6. am not an economist but even this posting doesn’t point out the actual dynamics that would cause the kwacha to fall. it still underpins the determining factors to BOZ measures like a squeez on liquidity and recurrent importations. with $2.9m in foreign reserves, new glencore investment and likely rebound in copper prices i still don’t see why zmk cannot hold for more than that long.and aren’t these BOZ measures enough to equal any by imf?i dont see for what we would still need imf prescriptions

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  7. @george, you may not be an economist but you are certainly better at the subject than HH and Miles and Noel Nkoma combined. At our level of economics, including myself, HH and others, we should be using the word “may” rather than be prescriptive and assume that our opinion is absolutely right and there is no other “right” one, like some cadres like to think of their “economic manager”.
    I also agree with you that some of our own economic medicine is what IMF would prescribe, except that we need some injection of IMF money to help us through the challenges of fallen copper prices and electricity challenges due to low dam levels (due to low rainfall, and not Lungu) until we stabilize again.

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    • @”Wise head”:
      First, I suggest you keep quite if have nothing to say rather than come on the platform and make noise.
      Secondly, as Zambian be truth to yourself and our country. Lungu will one day leave office but our country will be damaged. Its a known fact that the Zambian economy under PF and specifically Lungu has been destroyed. Look at our people suffering and struggling to afford anything and you are there happy and supporting people that have caused this and show no discourse in their actions.
      I don’t know about you but I love my country and my people. I fight for best for my country and people. Even HH or Miles if they had to do the same when they get into power I would go against them. Let’s be honest with ourselves and remember we have one home and only us can make…

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  8. am not an economist but even this posting doesn’t point out the actual dynamics that would cause the kwacha to fall. it still underpins the determining factors to BOZ measures like a squeez on liquidity and recurrent importations. with $2.9m in foreign reserves, new glencore investment and likely rebound in copper prices i still don’t see why zmk cannot hold for more than that long.and aren’t these BOZ measures enough to equal any likely imf prescription?

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  9. These are just projections and not facts. What will they say if drops below 8 and hold on it?

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  10. Its really laughable explaining to these people that the house will collapse because the foundation is weak, they will still debate with you. You don’t need an economist to tell you that this is artificial and nothing to do with measures…we need to diversify our economy from being reliant and held to gun point to mining to agricultural. The more we export the more forex comes in…those are the fundamentals simple as that.

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  11. Thanks for nothing for future negative projections. Can we live in the moment? Thanks.

    Markets never sleep.

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  12. Actually it will fall even further contrary to Standard Bank and try to revert to its mean over the long-term

    Its the nature of Bank of Zambia to push it and revert it to a mean value of 7.5 to 8.5 kwacha in the short term and ensure the recur sing falls below 9 and solidify to management it macro prudential further below 8.5 and sustain

    Not what is said is always researched and you need to see the reason behind the commentary As a buy side or sell side I will wish and forecast to ensure it happens because of my margin losses and sometimes if unethical I engage in this sort of market commentaries that manipulates information to reflect and…

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  13. that manipulates information to reflect and effect trades It should be stopped unless if thorough and in client relationship with further and clarifications otherwise you mislead without a disclaimer

    In terms of Bank supervision policy must extend not only to trades but research and dissemination and ensure if its public its thorough and factually correct to avoid rigging the markets or fronting the trades in spreads and volumes by sentimental of sensational commentaries by market players

    Thou its true that the African currencies have performed those risks and gains should be reduced and forecast on the individual assets in currencies gained…

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  14. clients in this the public addressed case given a thorough explanation that effects their position appropriately without any liability on the part giving commentary Its unethical and should be stopped on the regular with in this case with Balance of accounts can give a complete statement that sets the market like yellen

    Bashi tamara also is good but on this one he has missed it For elder reauters Miles There is a long of mix up and not coherent but gives meat to discount from and agree

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  15. if you hold positions and significant positions in the currency you need to exercise due diligence and never give commentary that turns out to diverge significantly from the market for those who comment and trade You should actually be commenting giving the spreads distinguishing fact from opinion In this Case this is an opinion from parties and those with facts to exert and affect the course of trades in the kwacha will make the market and we will be glad to listen from them where the kwacha will go but consensus is that the kwacha will continue to gain and gravitate around 7.7 to 8.5 in the short term but like all emerging and frontier…

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  16. economies good prospects it will continue to land on the good note below 7 but the depends on actions from BOZ both sterile and unsterile bearing the need for long-term macro prudential MGT but the forecast looks good for the KWACHA

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  17. Simply check the currency in emerging checks at the recent trades and initiatives on inter bank in china as it affects confirm also the Nigerian reasoning to trade the Yuan with the developments in the US economy confirming the Germans manufacturing sector as mark in the euro and see whether the kwacha is reflecting even in the build in FDI flows implied in the delays implied in the yellen rates as exhibited by treasuries both supra and multi nationals

    Its confidence in the kwacha resulting

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  18. he is trying to discourse the performance of global currencies narrowing down to the fundamentals driving the gains in the emerging and frontier markets The analysis is incomplete when it comes to individual currency performances in those packs okay and more so the characteristics being shown by emerging currencies and frontier but one will ask what is the composition of that African index is it 22 27 or 30 best or worst currencies what is the composition of weights in that index represented by volumes in both people and values In short its erroneous to simply have a blanket index with no proper explained track It will be better to dwell on individual…

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  19. currencies and confirm the pack in those indexes He heed needs to make a difference between a CURRENCY UNION or TRADE OR CUSTOMS and align the index reported as currency TRACKER in performance according

    he is simply measuring currency risks either systematic or other but much of it may be behavioural in Africa and may not hold So dissect the kwacha first and reflect the characteristics more and confirm the packs

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  20. Last week we had one Government spokesperson giving us eight reasons why the kwacha had started to appreciate. Prominent among which was ” the wise leadership of you know who “.

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  21. Though standard bank leads in exerting pressure on cash flows in Africa to effect trades, the commentary on the kwacha must be reflective of the future real options like you have said above The points by Chishimba kambwili were well researched I even wondered and reflected for instance look at the kwacha in the following African packs and see performance
    SA UGANDA KENYA NIGERIA TZ RWANDA ZAMBIA
    USD RETURN STOCKS % 8.6 2.3 2 (12) (8) (.9) (3.4)
    CURRENCY VS USD 4.5 0 .8 .1 (1 .5) .2 .5

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  22. The recent retraction and performance of the kwacha against the USD is simply out of confidence see the performance of stocks against USD and correlation with stocks performance on individual exchanges
    It will be wiser also to support the currency packs to engage in inter African Trade so that confidence is further enhanced in the currencies

    The gains will continue for the kwacha////////////////////////////////////

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