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Stock market investors not that brave after all

By Admire Mavolwane

NOTHING could be closer to the truth than that stock market investors, whilst generally regarded as having a higher appetite for risk than their money market counterparts, are in reality

a thoroughly jittery and faint-hearted lot.

This was evidenced by last week’s events. Having taken a three-day break, as the nation took time to reminisce and celebrate 25 years of Independence, investors also took that opportunity, probably in fuel queues and other popular social places, to digest the tit-bits of information gleaned from various sources that had attended consultative meetings hosted by the governor of the Reserve Bank as part of the preparations for the post-election monetary policy statement.

Judging from the reaction of stock market investors, whatever was said by the governor at those consultative indabas had been really scary.

As is the norm with serial transmission of information, the communication became increasingly distorted and exaggerated in repetition. Come Tuesday, investors were now trying to sell whatever they were holding, memories and scars of December 2003 still fresh in many minds. It would appear that many were not taking any chances.

On that first trading day of the week, the benchmark industrial index lost 4,88% or 157 846 points, the first time that the market had turned the other way since March 9.

On Wednesday, a mini blood bath resulted in the market losing another 220 717 points. The last two days of the week saw further losses of 71 868 and 103 836 points as the index closed the nightmare four-day period at 2 683 524 points.

In that short period, investors’ wealth dissipated by 17,12% as losses were recorded across the board.

Art led the losers, retreating by 41%, closely followed by Zimplow, Zimpapers, Zimnat Lion and Willdale.

It is rather ironic, or may be not, that counters named after the country jostled with Art for the infamous wooden spoon. Not to be left out, the blue chips also joined the trek southwards, Innscor leading the pack with a 30% “devaluation” in the share price.

Delta lost a quarter of its value, whilst Meikles and Old Mutual both shed roughly 9%.

At the other end of the spectrum, only six counters, surprisingly traded positively. These are illiquid Border, Colcom, Falgold, ABCH, Halogen and Radar.

With the exception of Colcom and ABCH, the rest are thinly traded shares and obviously some bargain hunters thought the ensuing chaos would present a buying in opportunity when others were bailing out.

The weekend break of the 23rd and 24th gave investors another opportunity to re-group, re-think and reassess their positions.

As with the earlier weekend break, rumour mongers facilitated heated debates with regard to the direction of the country and all the key markets; shares, money, foreign currency and property.

Also topical was the speculation that the country’s hard-working RBZ governor had resigned. The governor himself came out with guns blazing.

He emphatically denied the hearsay and advised those who had started updating their CVs that they may have to wait a little bit longer — maybe three more years.

Of interest to stock market punters and real investors alike were the implications of this new development and the fact that the delivery of the monetary policy statement had been deferred “until all consultations had been completed”.

The consensus from all this appeared to have been that the stock market remains the ideal home for monies and the scramble for shares began all over again, with many trying to buy back the positions they had previously sold.

Consequently the industrial index started recovering on Monday, albeit lethargically, gaining only 14 842 points. Activity improved on Tuesday and Wednesday, both in terms of gains and volume trades.

In the three-day period to Wednesday, the industrial index recovered 7,70% to close on 2 890 190 points and to all intents and purposes the march back to the 3,3 million level continues.

Having illustrated the effects of the talked about rumours and their impact on human lives and their wealth, we now turn to the corporate results published this week.

Starting with the solid six month to February 28 performance from Tractive, turnover grew by 112%, to $144,5 billion, buoyed by strong trading volumes in the parts and service departments, particularly in the first quarter.

Demand slowed down in the second quarter, with major mining associated customers citing cashflow constraints.

Operating profits growth was a subdued 49% to $18,8 billion as operating costs growth at 238% increased ahead of revenues.

The increase in expenses was attributed to rising cost of skills retention and management’s prudent decision to book through a provision for overdue debts. Resultantly, the corresponding margin took a knock receding by seven percentage points to 16%.

Revaluation of investment properties in conformity with IAS40, saw gains of $3,1 billion being pushed through the income statement.

Unlike 2004 when the group was in an interest paying position of $457 million, this time around $2,3 billion in interest inflows were recorded. These two boosted the bottom line which, after accounting for taxation and minority interests, worked out at $14,1 billion, reflecting an 89% return on the prior period.

Listed transport and logistics group Pioneer also unveiled its financials for the 12 months period to December 31 2004 with turnover growth at 244% to $135,5 billion comfortably outpacing the December 2004 year-on-year inflation figure of 132,7%.

Expenses, exclusive of depreciation, grew by 292% whilst depreciation quadrupled to $9,6 billion, obviously showing the impact of the vehicles acquired during the course of the year. Consequently, operating profits doubled to $15,8 billion as operating margins declined from 19% to 12%.

Finance charges of $22,2 billion proved to be the bane of the group effectively eroding all profits and leading to a $4,2 billion loss attributable to shareholders.

Whilst the group is operationally sound, the interest bearing debt amounting to $34 billion, which no longer attracts concessionary rates, makes a lot of investors uneasy.

Management has, however, assured shareholders that the issue is receiving adequate attention and hopefully the debt would be fully retired in the near future.

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