HomeBusiness DigestLow interest rates spur industrial index

Low interest rates spur industrial index

Roadwin Chirara

THE continued decline in interest rates charged by commercial banks has been attributed to the current rally in the industrial index.

etica, sans-serif”>Analysts say the decline from an average of 300% last year to about 130% currently, has caused the sudden shift of focus by investors.

The analysts said investors were shifting their money from the money market to the stock market in an effort to realise higher returns.

They said the money market was currently unattractive to investors because of the low returns that are likely to be realised due to low rates.

“The stock market is responding to the current shift of investors and this is likely to continue as long as rates remain low,” said one analyst.

She said the cheap pricing of listed stock was also working in favour of

investors who are looking at stronger listed financial counters.

“Heavyweight counters have been targeted mainly because of the pricing of the stock which is viewed by most investors as cheap compared to other markets,” she said.

Other analysts viewed the current bull-run on the industrial index as being influenced by renewed investor confidence in the stock market.

They said other factors such as lending rates and anti-inflation measures put in place by the Reserve Bank were creating a suitable investor platform on the stock market.

They however said the monetary policy statement due at the end of the month was likely to slow down the current bull-run, as investors take the “wait and see” approach to their investments. Profit taking is also likely to see reduced volumes on the market.

“The monetary policy is likely to slow things down and this can also be said of the elections due in March,” an analyst said.

An economist with Trust Holdings, David Mupamhadzi, said investors were shifting attention to the stock market due to subdued interest rates.

“Traditionally the market is quiet around this time, but the shifting of investor funds to higher return investments has really played in favour of the stock market,” said Mupamhadzi.

He said investors were also trying to cushion themselves from the money market by moving to the equity market in anticipation for higher returns.

The industrial index gained 17,6% in the first 12 days of trading this year.

By close of trade on Tuesday, the industrial index surged 6,45% to notch 1 420 411,11 points while the mining index put on a paltry 0,47% to close at 214 688,36 points.

Recent Posts

Stories you will enjoy

Recommended reading