Where will stock markets close in 2018?

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Kudzanai Sharara
The equities market is having a bad start to the year with all indices on the Zimbabwe Stock Exchange currently trading in the negative territory year to date. In 2016, the ZSE’s main Industrials Index had a much bigger fall after it lost 7,82 percent in the first 12 days of trading.

In 2017, the market was, however, slightly positive having gained a marginal 0,98 percent.

This year the market has, however, started on a low note with the traditional main Industrials Index having lost 6,5 percent to 311,37 in the first 12 trading days of the year up to Wednesday 17, 2017.

The Minings Index is also trading lower having lost 5,53 percent year to date.

The ZSE All Share index which was introduced this year and started at a base of 100 has since dropped 6,76 percent year to date while the ZSE Top 10 which was also introduced this year is the biggest loser after it lost 7,16 percent to 92,84.

Analysts have attributed the slow start to the year to a number of factors chief among them being the fact that the ZSE is coming from an overvalued level so there is bound to be some correction.

There is also now less panic on the currency front post the change in the presidium so those who were in the market for hedging purposes can now liquidate their portfolios.

Last year saw the ZSE rally to an all-time high of 333,02 after putting on 130,42 percent. Last year saw local investors piling into the stock market as a way of hedging against currency risk.

The depreciating RTGs, and shortage of viable alternative investments also helped fuel the gains.

The market has however started the year on a correction path with blue cheap companies leading the fallers. Among the big cap counters BAT had lost 16 percent as of Wednesday, 17, 2017.

Econet is also trading negative having lost 10,7 percent, Old Mutual down 10,4 percent, Simbisa off 4,3 percent, and Padenga down 8,6 percent.

Innscor is the biggest loser among big caps after it lost 20 percent to 80 cents.

The drop in the equities market is also in line with the January trend as investors, foreigners in particular, are still to return from their holiday break.

Another school of thought in the market is that there is renewed optimism that came as a result of the political changes that took place in the country.

This has seen forex rates coming off and by the same reason the stock market.

Investors have however not entirely stayed away from the markets as the volumes have been improving by the day and are several times higher than prior year comparative.

As of Wednesday, a total $14,4 million had been invested in the markets against $4,9 million that was invested for the comparative prior year.

It’s, however, still early days though to gauge where the market will close by year end. Fundamentally the high bank deposits that have created the untenable gap between bank balances and US dollar cash is still there and there is still a lot of money looking for a home.

Finance and Economic Planning Minister Patrick Chinamasa has, however, hinted that government is planning to mop up the excess liquidity to deploy it in the productive sector.

There is also an element that those who only invested in stocks for hedging purposes last year might not do so this time around and we might not see high turnover as high as last year’s $694 million.

Institutional investors are, however, likely to keep an eye on inflationary pressures and given the current trend the only option will be to seek haven in stocks.

Inflationary figures came out this week showing that the annual inflation for December 2017 rose to 3,46 percent after gaining 0,49 percentage points on the November 2017 rate of 2,97 percent.

The current downward trend might go on for long, probably until elections, and depending on how low it will go, the recovery, if there is going to be any, might not be strong enough to give the market a strong positive close.

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