THE stock market is likely to remain in a slumber as the country heads for the 2005 parliamentary election while yesterday’s budget was not expected to inspire any major interest in sto
ck market activity.
Analysts said the market was likely to see a protracted dip in stock market volumes and subdued trade should persist at least just beyond March next year.
Other than anticipated interest rate incentives — which were not given in Gono’s quarterly outline — the element of political turmoil is expected to continue swamping investor interest to April, they observed.
Interest rates, averaging 100%-plus, have been a disincentive for equity investment, as investors still find the money market a more attractive wealth-creation avenue. It is also fairly stable and predictable too.
The analysts said that apart from “a few marginal gains” in certain stocks or companies, the market is likely to remain becalmed towards the general election.
The market watchers said it is a trend that follows on the 2000 scenario when the Zimbabwe Stock Exchange (ZSE) slumped for a long time on the back of flaring countrywide violence prior and after the polls.
Just before the watershed election and during the last quarter of 1999, the main index remained stagnant, hovering around 16 900 before losing some further 2 000 points — to the 14 000 ranges — as the election date drew nearer.
It then crashed to around 12 900 in the aftermath of the polls. before posting a moderate recovery to notch 14 700 in June and exactly three months after the election.
The likelihood or fears of a repeat of this trend now and early next year, is what has been influencing market direction, the analysts said.
“It’s going to be the same story. The market will be quiet for some time,” said an analyst with a local broking firm.
Market watchers were of the view that acting Finance minister Herbert Murerwa’s budget was unlikely to trigger any serious action not only because the more complementary monetary policy statement had failed to ignite any upward movement, but yesterday’s presentation was merely “an allocation” and outline of financial figures to various state departments.
Already, the markets this week started showing signs of fatigue. The index has been floating at 830 000 and 860 000 points for the past two months and such a thin movement reflects the foul mood.
Blessing Sakupwanya, a business analyst with CFX Financial Services, said although the market would have some periodic leaps, overally it would remain on the downside.
“We don’t anticipate much activity in the next few months as we approach the elections. Investors are taking precautionary measures. Even after elections much would depend on how the investors will interpret the outcome,” Sakupwanya said.
Companies that have external shareholders are likely to suffer the brunt of the election fatigue as possible investors are more likely to take a cautious approach than locally-owned entities.
More importantly, Sakupwanya believes the market would post a quick recovery than five years ago, when it took nearly half a year to bounce back.