THE Stock market this week rebounded with an average daily turnover of nearly $1 billion being recorded on Wednesday as the mainstream industrial index cl
osed at 355 135,29 points from 327 645,08 during the same period last week.
The mining index rose 8,13% since Monday to close at 137 645,81 points during the period under review as the entire market shrugged off earlier volatility induced by rising interest rates on the money market.
Analysts said the stock market’s upsurge had been mainly driven by reasonable gains in second-tier shares such as Zimre, industrial conglomerate CFI and liquor producer Afdis among others.
Heavyweight counters such as, Delta, Meikles, Innscor and cement maker Pretoria Portland Cement (PPC) also registered some gains which helped push the market higher.
Metropolitan group economist Brains Muchemwa said the fundamentals driving the stock market still exist and as such bulls are expected to continue charging.
“In an environment where there is excess liquidity on the market, investments are traditionally made in real assets. The stock market is one, and stock prices are expected to continue rising offering investors attractive returns,” Muchemwa told businessdigest.
Muchemwa said most firms were expected to be quoted firmer in the short-term, moreso counters which are releasing pleasing results.
“Temporary dips (on the market) have been encountered since the beginning of the year, but the market has been active and is expected to maintain the momentum,” he said.
As of October 31, the industrial index has gone up by 1846%, while the mining index rose by 2 221%.
Kingdom Stockbrokers analyst, Patrick Saziwa, said inflationary pressures and companies’ results being released were expected to push stock market indexes northwards.
“As a result of the inflation pressure we do not expect the market to be depressed for an extended period of time. We still foresee negative real rates over the medium-term and investors should take advantage of the current market depression as a buying opportunity especially on quality counters,” Saziwa said.
Some market analysts this week said the stock market rebound may last for a short while in anticipation that the $51 billion Treasury Bill maturities expected to flood the market in the next week would send rates lower.
“The market is expected to remain bearish in the short-term on the back of the prevailing high interest rate regime,” a market analyst said.
Presently, interest rates on the market have maintained an upward pattern on the back of stringent liquidity management measures being employed by the Reserve Bank. Against a background of high inflation and relatively lower returns on the money market, the stock market will remain an attractive asset class in the medium to long-term.
Meanwhile, the money market is expected to remain short in the short-term in response to monetary changes by the Reserve Bank meant to suck out excess liquidity prevalent on the market, analysts said this week.