ZSE remains on growth trajectory

07 Sep, 2018 - 00:09 0 Views
ZSE remains on growth trajectory

eBusiness Weekly

Taking Stock Kudzanai Sharara

The Zimbabwe Stock Exchange remained on a growth trajectory in its first trading month post the July 30 harmonised elections that saw President Emmerson Mnangagwa and his Zanu-PF Party emerge as victors.

The outcome of an election, especially presidential polls, normally has a large impact on policies and economic plans and visions of central government, which affect economies and business for months or years to come.

Negative perceptions about the victory of a particular candidate, as observed across world politics, may thus ignite a flight to safe havens by investors leading many, especially foreigners, to divest and send markets into tailspin.

On the other hand, positive perceptions normally elicit bullish reactions from stock markets, as investors take positions in anticipation of dividends during the reign of particular candidates.

On his part President Mnangagwa has pledged a cocktail of economic reforms to improve the investment climate and enhance policy clarity, consistency and predictability. Most of these basic tenants were lacking in the previous Government where the investment climate was considered as toxic.

While it’s still early days to attribute market performance to promises made by President Mnangagwa’s Government, there is comfort in that there was no market sell-off as what happened in 2013 when former President Robert Mugabe was re-elected.

At the close of trading in August 2018, the ZSE’s main Industrials Index was up 2,7 percent to 394,64 while the market capitalisation was up 2,33 percent to $12,47 billion.

The positive trend during the month also holds for other indices with the All Share Index, adding 2,62 percent to 117.33 while the top 10 index also headed north after posting a gain of 2,40 percent to close August 2018 at 121,69. Industrials were largely buoyed by significant gains during the period under review in bellwether stocks Innscor Africa (246,75c) and Delta (220,18c), which strengthened 3,35 percent and 2,41 percent, respectively.

The mining index however, shed 1,62 percent to close the month of August at 161,34 weighed down by losses in multi-commodity miner RioZim.

While the returns post elections are positive, the question remains just how correlated, if at all, market performance is with the person at State House. The ZSE positive performance is not entirely down to confidence in the new Government with some analysts believing the equities market is providing investors with a platform to hedge against currency weaknesses as well as make reasonable returns.

August coincides with the earnings season, where companies have been reporting double digit growth rates so chances are that investors have shifted focus to the fundamentals of individual companies.

However, there is consensus among investors that until distortions on the currency front are dealt with decisively, hedging will be the main reason investors will pile into real assets such as equities, Treasury Bills, Savings Bonds, and of late private equity.

In August, the ZSE gave investors an average return of 2,7 percent, at a time, money market investments can earn investors interest of 3 percent per annum.

Year-to-date, the average return for ZSE investors using the traditional industrials Index is 18,5 percent against 3 percent per annum earned by those invested in term deposits, 7 percent earned by those invested in Savings Bonds, and between two to 10 percent earned by those invested in TBs.

This is in contrast to what happened in 2013, where soon after former president Robert Mugabe was re-elected, the market tumbled and recorded gains in only four of the 19 trading days.

After closing at 232,87, a day before the 2013 harmonised elections, the market was to tumble 21,98 percent to close the month at 181,67.

Investor participation however seem to be within similar levels as shares worth $51 million changed hands this August 2018 against shares worth $54 million in August 2013.

Foreigners closed August 2013 as net buyers by approximately $4 million compared to now when they have emerged as net sellers by $5 million.

Share prices were however much lower back in 2013 with market capitalisation standing at $4,68 billion compared to the current market capitalisation of $12,47 billion.

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