Easing Monetary Policy and Bullish Copper – Weekly Note

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Bank of Zambia cut rates by 150bps in the week to 11%. This is the 3rd rate cut of the year bringing the total reduction to 450bps from 15.5%. Commercial banks are expected to adjust their lending rates by 1.5% to reduce the loan repayment bargain for commercial banks further with immediate effect. In the same vein, the statutory reserve ratio was slashed by 300bps to 9% which is expected to free more liquidity into the market for lending purposes.

The Kwacha reversed some of its losses by appreciating to ZMW8.9/USD from the ZMW9.015/USD levels last week. We expect the Kwacha to depreciate in the medium term propelled by rising business pulse. However appreciations will be observed in the month of August projected from corporates converting Dollars to Kwacha targeting to beat the tax amnesty deadline extension.

Copper remains bullish trading at 2yr highs of $6,410 per metric ton on the London Metal Exchange – LME. The weak dollar index continues to offer support to global commodities such as Oil, Copper and Gold. Crossing $6,500 per metric ton is not so far fetched next week. With China abolishing importation of scrap metal in 2018, the electric car era and the revised IMF China economic growth forecasts, we project copper to continue rallying in the medium term. Cautious optimism is advised in making credit decisions based on the dirty price of copper because the noise in the price of the red metal could clear out any time. Suffice to say the bullish run may not be fully sustainable.

Maize prices as provided by Zambia Commodities Exchange – ZAMACE are $127 per metric ton while Soya is trading at $245 per metric ton. ZAMACE has continued with sensitization for its trading platform to Zambia farmers on the benefits it provides. Also telling farmers that there is a higher price for their produce than an FRA price. Names of certified wharehouses across the nation are expected to be announced this month for farmers to store their grain in pending trading. Farmers can now use Wharehouse receipts to obtain structured financing from commercial banks.


Trading Economics of Zambian Benchmark Interest Rate
Trading Economics of Zambian Benchmark Interest Rate

Trading Economics Kwacha Trajectory Graph
Trading Economics Kwacha Trajectory Graph

London Metal Exchange Copper Graph
London Metal Exchange Copper Graph

Soft Commodity Prices Extracted from ZAMACE
Soft Commodity Prices Extracted from Zambia Commodities Exchange – ZAMACE

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