HomeBusiness DigestIndustrial index breaches a new high

Industrial index breaches a new high

Eric Chiriga

THE industrial index breached the 60 million point mark on Tuesday as bulls raged on the equities market after discounting reports inflation had eased from an all-time high touched in May.

ustify>The key index surged to 60 110 638,05 points on Tuesday after having surpassed a 50 million-point all-time high the previous week.

The index gained a further 1 928 017,71 points to reach 62 038 655,76 points on Wednesday, and analysts said sentiment was likely to remain bullish on the equities market after the central bank began rejecting treasury bill bids asking for high interest rates.

The mining index also breached the 20 million-point psychological barrier, pushed by gains in Rio Tinto and Bindura.

Rio Tinto gained $135 000 (27,0%) to $635 000, while Bindura added $5 000 (25,0%) to close at $25 000.

The mining index gained 2,99% or 26 189,02 points on Wednesday to reach 21 587 530,40 points on Wednesday.

Analysts said the money market had been awash with cash, prompting short-term rates to fall and forcing investors to move funds into other investments like property and equities.

The money market was in surplus to the tune of $875 billion on Tuesday.

“Interest rates are currently low on the market due to TB maturities which left the money market awash with money,” said Farai Dyirakumunda, an analyst with Interfin Research.

Consequently, he said, this triggered aggressive buying on the bourse, pushing the equities market to higher levels.

Investments on 30-day paper declined to around 100% from around 350%.

The index reached the 60 million-point mark a day after the announcement of inflation figures by the Central Statistical Office.

The June year-on-year inflation rate decelerated by 9,5 percentage points from 1 193,5% to 1 184%.

Dyirakumunda said the stock market’s stellar performance over the past two weeks had also been caused by the sharp depreciation of the local currency on the parallel market.

“Movements of the Zimbabwe dollar exchange rate is also a factor,” he said.

Whilst the greenback is currently trading at around $450 000 on the parallel market, it is pegged at $101 195 on the official market.

Dyirakumunda said dually-listed counters had gained significantly from the local currency’s loss of value on the parallel market.

“Dually-listed counters have benefited because the ZSE share price reflects the exchange rate difference,” he said.

The ZSE, one of the few remaining secure investment options in the country, is gaining momentum after a recent dispute between stockbrokers and the Zimbabwe Revenue Authority over payment of Value Added Tax.

The ZSE is planning to establish a secondary market for small and medium-scale enterprises , a move that will enhance activity and create cheap cash-raising avenues for small enterprises.

The bourse provides a platform for raising capital for both Zimbabwean and international companies through the issuance of equity, debentures and depository receipts.

A number of listed companies have embarked on rights issues to raise cash for re-capitalisation or expansion.

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