Who needs an economist or investment analyst

By Admire Mavolwane



JOHN Maynard Keynes who, together with Milton Friedman, is probably the most influential economist of the 20th is said to have hoped that being an ec

onomist — we would add and also an investment analyst — would one day be deemed as respectable and useful as being a dentist. If no primary school kid aspires to be an economist, where do analysts and economists come from? Most probably they discover by accident their passion for analysis and economics while at university, which sort of explains why the profession does not command much respect.


In Zimbabwe, the situation is even worse, because policies change so much that whatever the prognosis economists and analysts give quickly loses relevance. The best answer economists and analysts can probably give to any question at the moment is “who knows”.


For instance, a week ago the Reserve Bank reduced the amount of statutory reserves from 60% to 50% for commercial and merchant banks and from 45% to 40% for discount houses. This came after the requirements had been increased a few months earlier.


On the Monday the inflows were expected, the central bank rather than pump money into the market, issued CPI linked bonds of various tenors. Then on Wednesday, two days later, it bought back the same paper. This was just the latest in a series of twist and turns from the monetary authorities.


Many stock market analysts have been indicating that the bulls will take off soon. This theme song has been sung for the past three months. In April, they said wait for May, with a total of $25 trillion Treasury Bill maturities expected. Bets were being waged on the course of action that the central bank would take to siphon off the liquidity. May came, and went, with all the predictions coming to nought, suspension of trading in the last two weeks of the month notwithstanding. June ends today and as of Wednesday, the industrial index was up only 17,2% mainly on the back of Old Mutual and PPC. In July, $41 trillion worth of treasury bills are expected to mature so consult your learned investment analyst. Is it time to buy or not?


China, the fastest growing economy in the world, which achieved real Gross Domestic Product (GDP) growth of 9,9% in 2005, is counted as one of Zimbabwe’s remaining few friends. The strength of the relationship is, we are told, evidenced by the increasing number of Chinese nationals and businesses in Zimbabwe. The just ended golf tournament held in Harare and the recent trip by the vice president to China a few weeks ago were touted as further evidence for all to see that China is our friend both in deed and spirit.
 
Whilst the Chinese minnows were teeing off on the golf course, the Chinese Prime Minister, Wen Jiabao, was preparing for a tour to Africa which will take him to Egypt, Ghana, DRC, Angola, South Africa and Tanzania. In April this year, Chinese President Hu Jintao visited Nigeria, Morroco and Kenya among other African states. Zimbabwe, the good old friend, was not part of the itinerary in April and neither is it this time.


With most African economies reliant on commodity exports, mainly oil, copper, platinum, cotton and nickel, and China being the largest consumer of the these products, the forays into the continent by the two most influential citizens of China is seen as a strategic move aimed at establishing and deepening bilateral relations. The ultimate aim is to secure supplies of these all important commodities. Angola, for instance, is the biggest supplier of oil to China, whilst South Africa is important both as a source of platinum and a market for Chinese goods. Zimbabwe, it seems, does not appear on the strategic map of that country in as far as supplies are concerned.
 
The other side of the coin is that whilst we bought their buses, planes, throwaway gadgets and apparel, in the bigger scheme of things we are not an important market for their booming export markets. So economically, we are not on the radar screen. It is, however, rather difficult to conclude where we stand politically. What we can be sure of, with a measure of confidence, is that friends who never visit, but send their children to play, send wrong signals.


There are some who believe that numbers tell a story and do not lie. A look at statistics indicates that the economic gulf between China nd us is very wide.


Whereas their economy grew by nearly 10% last year, ours shrunk by 6,5% according to the International Monetary Fund (IMF). 2006 and 2007 will see the Chinese economy growing by 9,5% and 9%. At the same time Zimbabwe is projected to decline by a further 4,7% and 4,1% respectively. On the inflation front, the rift widens.
 
China is averaging a stable 2% as opposed to the four digit figures coming out of Zimbabwe. China has a trade and current account surplus, in addition to foreign reserves amounting to US$875 billion, and Zimbabwe has a hugely negative trade balance and has no meaningful reserves to talk about.


The countries that the two foremost Chinese politicians have visited and are visiting have in recent years, been achieving real economic growth spurred on by booming metal and commodity prices and inflation is firmly under control. Is this another pointer to why the Chinese premier will only be taking a peek at us from across the Limpopo River? After all, birds of a feather flock together.


Don’t buy beer, buy Delta….


A connoisseur of trading on the Zimbabwe Stock Exchange once gave us this advice; “When it comes to Delta, forget about all the fundamental models, do not even bother with the discounted free cash flow and dividend growth models. Do not waste time on the charts; just compare the Delta share price to a pint of beer. If the share price is lower than that of a pint, as it is now — $75 000 vs $150 000 — do not buy the lager, buy the share.
 
When the price of a pint is lower than the share price, sell the shares and buy the beer.”

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