eBusiness Weekly
Taking Stock Kudzanai Sharara
The decision to invest money can be an incredibly difficult one, not only because of the possible risks and losses involved but because you can be hard-pressed to find an investment with optimal returns particularly in a volatile and uncertain environment as Zimbabwe.
The Zimbabwe Stock Exchange has been on an upward trajectory since the end of March before taking a deep in mid-June up to the end of that month and also just before elections to around 15 August when it started nudging ahead again, a trend most market watchers expect to continue for the foreseeable future.
Expectations are that, “cash rich” individuals and institutions would continue to hedge against weakening RTGS balances although some analysts believe equities can be more than a hedging option, and can bring positive returns to investors.
There is, however, consensus that until distortions in the currency market are dealt with decisively, hedging will be the main reason investors are piling into real assets such as Treasury Bills, Savings Bonds, equities and of late private equity.
The operating environment during the period under review was characterised by nostro funding challenges, cash shortages and inflationary pressures. Most of these challenges were a result of the mismatch between bank balances and hard currency, resulting in currency distortions threatening to undermine viability of the financial sector.
Prevailing low interest rates in the money market coupled with weakening RTGS balances, has also meant keeping cash or near cash assets is not an option as the future is inherently unpredictable.
This uncertainty, and the fear that accompanies it, especially when history says during hyperinflation value was destroyed makes investing in real assets the best option for favourable outcomes, analysts say.
By half year, more than $309 million had been invested in the equities market, a figure which compares favourably with just above $115 million that had been invested prior year comparative.
The amount was, however, lower than the $579 million that investors poured into the market in the second half of last year.
The ZSE’s main industrials index has so far added 16,36 percent year-to-date offering investors the highest returns if it closes the year around the same levels. If we are to discount for value loss, the returns will still be around nine percent, in line with what investors in Treasury Bills are earning.
Market watchers, however, say asset selection remains key as evidenced by the better performance shown by the ZSE Top 10 index up 19 percent year-to-date as at Wednesday this week. Delta and Econet lead the way with year-to-date gains above 30 percent so far. The two counters have also received the bulk of the invested amounts.
Market watchers say, the market is being driven by local investors for hedging purposes while foreign portfolio investors are largely on the selling side in view of the currency uncertainties and their failure to repatriate investments.
While alternative investments into private equity also present compelling opportunities, investors seem to favour Treasury Bills, Savings Bonds and government related bonds. In the last six months to January, appetite for TBs particularly from banks has been very strong. The attraction is the interest rate of between two and 10 percent which compares favourably with riskier money market investments paying 3 percent.
The market is currently sitting on TBs worth approximately $5 billion with financial institutions holding approximately 60 percent.
FBC Holdings Limited increased its holdings for bonds and debentures (savings bond) by 596 percent to $192,2 million, Barclays had its holdings jump to $306 million from $111 million, NMB has $100 million locked in TBs while ZB Financial Holdings’ holdings were up 20 percent to $187,1 million.
Despite the asset class being one of the reasons why the financial sector in general and the currency market to be specific are distorted, it is seen by investors as a safer bet at a time loans and advances have slowed amid few creditworthy clients.
The property market should also not be overlooked. Whilst rentals, yields and values are currently subdued, real estate can still generate an ongoing passive income, and can prove to be a good long-term investment if its value increases exponentially over time.
