eBusiness Weekly
Tawanda Musarurwa
HARARE – With the local equities market experiencing a bit of a bearish trend in February 2018, an important question is ‘how normal is this’?
The Zimbabwe Stock Exchange (ZSE) dipped in the month of February, coming of 3, 01 percent to close the month with a total market capitalisation of $8, 79 billion.
The ZSE’s All Share Index (which was introduced at the beginning of the year) dropped by 3, 60 percent to 88.03 while the Top 10 Index retreated 3, 01 percent to 87.07 during the month under review.
The Industrial Index was down 3, 54 percent to 294.55, while the Mining Index fell by 4, 22 percent to 124.91.
February’s top gainers were Zimplow, up 25 percent, Zimre Holdings Limited, which rose by 15 percent, Old Mutual up 2, 08 percent and AFDIS, up 2, 07 percent.
On the other side of the coin, the most significant losses were recorded in Ariston down 21, 38 percent, while African Sun was down 19, 78 percent, Art down 19, 64 percent and NicozDiamond, which fell 19, 48 percent.
The bourse’s monthly flows turnover rose 125, 78 percent to $80, 21 million, with average trades of $4, 22 million realised in February.
The somewhat bearish trend that has been seen since the beginning of 2018 may come as a surprise to some given the highs hit by the ZSE during the course of last year.
“The year (2017) witnessed quarterly increases in flows into equities as the value preservation theme dominated investment strategies.
“The second quarter (Q2) and third quarter (Q3) realised 48 percent and 87 percent growth in turnover respectively resulting in the mainstream index ending Q3 at 418.39 up from the 145.27 level at the beginning of 2017 (a 188, 01 percent increase).
“The switch out of monetary assets into equities peaked in the month of November, which saw the mainstream index reaching an all-time high of 534.13,” highlighted market analysts Akribos Research Services.
But what constitutes a ‘normal market fluctuation’?
Securities Exchange Commission of Zimbabwe (SECZ) chief executive Tafadzwa Chinamo says current fluctuation trends are normal.
“Because the stock market is an auction made up of buyers and sellers of shares of publicly traded companies, fluctuations in stock prices is nothing out of the ordinary. In fact, the price of company’s stock can vary drastically from one day to the next, it is important to understand what causes stock market fluctuations and its risks. Thus, Security prices fluctuate frequently, increasing and decreasing in market quotation sometimes by shocking amounts in a single trading day,” he said.
“Sharp falls and rises however raise eyebrows. We have no set threshold(0) to consider what is normal and what is not but one can make use of technical indicators to consider whether share price movement of a particular company is above or below its pre-determined moving average or simple average and why. In our situation, the ATS (Automated Trading System) has set price breakers of 20 percent per day and any trade price cannot go through if it is above 20 percent.
