Bears continue to dominate ZSE

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Kudzanai Sharara
Market correction on the Zimbabwe Stock Exchange continued with bears dominating trades for the five trading days to Wednesday this week.

Since the start of the year the stock market has been bearish closing in the negative territory in 12 out of the 17 trading sessions so far in the year.

Analysts said the market was adjusting from high valuations of last year where many counters hit record levels.

The stock market was bullish for the better part of last year culminating in the overall market capitalisation reaching an all-time high of more than $15 billion.

Although the market later retreated to less than $10 billion by end of year, it still closed the year with a 130,42 percent gain to 333,02 points.

Analysts thus believe the market is still adjusting towards intrinsic values in line with individual company fundamentals.

“A good indicator that what we are witnessing is market correction is the ZSE Top 10 index, which is the biggest faller so far in the year.

“If you look at the companies that make up that index, these are some of the best companies we have in Zimbabwe and most of them are well run with sustainable business models and have been consistently making profits and paying dividends.

One would expect share prices to firm, but that has not been the case, so the only plausible reason for the current weakness is that stocks were overvalued.”

Since the start of the year, The ZSE Top 10 Index had lost 9,79 percent as of Wednesday, becoming the biggest loser of the four indices on the ZSE.

For the five days to Wednesday this week, The ZSE Top 10 Index was also the leading faller after losing 2,83 percent to 90,21.

Most of the counters that make up the index closed in the negative with Econet dropping 14,91 percent to 70 cents.

The other fallers were National Foods down 6,97 percent to 600 cents, Padenga -4 percent to 48 cents, Simbisa -2,22 percent to 444 cents.

Overall there were 16 counters that closed in red compared to eight that managed to record gains. CBZ led the risers up 19,76 percent to 10 cents. Delta, Old Mutual, and Innscor were also among the risers.

The traditional main Industrials Index and the All Share Index have also been trading weak losing 2,14 percent and 2,18 percent respectively.

Activity was reasonable with more than $10 million finding its way into the market compared with $6,7 million that was invested prior year comparative. Delta and Econet received the bulk of the funds as long term investors still see value in them, despite short term investors bailing out.

Analysts said the current weaknesses is to be expected considering that the market’s rally last year was driven by the need to hedge against currency risk, something which has subsided.

“Last year some of the money that was finding its way into the market was coming in because people needed to hedge, but this year some of those positions are being liquidated as investors look for opportunities elsewhere,” said a local Stockbroker who requested anonymity for professional reasons.

There is a general feeling in the country that the economy is receiving the necessary ingredients for a turnaround.

Since his inauguration, back in November 25, 2017, President Emmerson Mnangagwa has not departed from his mantra that resuscitating the economy will be his top priority.

This week he told the international community attending the World Economic Forum in Davos, that the country is open for business.

“On my day of inauguration, I mentioned that economics and trade cooperation would be priority to the new order in Zimbabwe rather than politics as a priority. This is what we are going to do,” said President Mnangagwa.

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