Of The Afro Craze And A Sad Year For Equities

DECEMBER is usually a quiet month for equities. Activity is much influenced by investors selling to raise liquidity for the holidays. The month also coincides with the annual shut down for companies. However, this Christmas will be markedly different for most investors.

The traditional bear market was induced prematurely after a purge that took many by surprise on November 17. Not only are investors unable to get their monies because the stock market is not trading but Zim dollars are no longer easily exchangeable for goods or services leading to the zeros that grew on their portfolios during the year counting for very little, if anything.

Those who believe in trends claim that January’s performance provides a window of what is to come. If this is anything to go by the market was doomed from the start. The maiden month in 2008 closed with negative returns of 14,5%.  

For the greater part of the year, despite generally increasing nominal prices, the market lagged the parallel rate. Political uncertainty emanating from the March elections and the ensuing political strife gagged investor enthusiasm.

Equities were however solid towards the March 29 and June 27 runoff elections driven by ballot related expenditure. Foreign investors were also rumoured to have an optimistic eye for shares in anticipation of an economic recovery.

June was the best month during the first half of the year returning 15 034,26% and outmanoeuvring the parallel rate which only managed 6 900%.

 This was however nothing by comparison with what happened from late August to mid November. Fortunes turned after it became apparent that the political status quo was not going to change as soon as  had been hoped.

Negative expectations triggered the most vicious rally ever seen in the market. At its peak, equities traded positive for 24 days from October 10 to November 5 with average daily gains of 147,93%, icing the show by setting arguably the world’s highest day to day gain of 1 833,04% on November 10.

The euphoria was to be the markets undoing however, as authorities became increasingly interested.  Unearthing of cheque scams and price manipulations brought the party to an end. Two brokers had their accounts frozen and the financial system faced imminent ruin. Ironically, the year opened, and is likely to end, with a crisis in the financial sector.

Meanwhile, the corporate front was a hive of activity. In an event reminiscent of the re-introduction of coins in August, a new look Trust Holdings re-listed after four years of suspension to the delight of many investors.

The new company has interests in financial services; property; and agriculture exports. CFX will take the prize for stuttering this year; the bankers humiliating themselves when their rights offer was delayed after overlooking procedures and failing to notify the regulators. Recently they made the tabloids over a cash scam.

This was seconded by KMAL. Only months after the merged group had listed as the then biggest company by market cap, it was rocked by board room squabbles. A lid has since been placed on the can of worms but one wonders how that pot is stewing.

If 2007 was the year for IPOs, then re-branding and restructuring took the limelight in 2008 with four companies changing names. Zeco was the only primary listing for the year making its debut on February 22.

Despite receiving an oversubscription of 1,3 times, indicating the markets appetite for new listings, hyperinflation has made raising capital by way of IPO’s less attractive. Most capital expenditure is now foreign currency denominated. The listing of Zeco was an eye opener for Native Investments Holdings which appears to have dropped the mooted listing of another of its interests; Pinnacle Property Holdings.

FML pioneered re-branding in 2008 after changing its name to AFRE (Africa First Renaissance) on March 3. The move was meant to reflect a new controlling shareholder and a change in management after Renaissance Financial Holdings acquired a 32% stake.

Abandoning the FML brand was a remarkable move. Not only was it muddled by its fling with failed banks ENG and Trust, but it gave the impression that the group was only into life assurance. The move allowed the group to restructure and give more clarity to its operations. The result is an enhancement in the groups appeal with interests in life assurance; short term insurance; property investments; and actuarial consultancy.

Driven by a similar motive Cottco also changed its name on July 23. This was done through an “acquisition” of Cottco, its subsidiaries and associate companies by a holding company AICO. The consideration was two AICO shares for every three Cottco shares.

In all fairness this was simply share consolidation under a new banner.

Critics also pointed out that the fortitude of the Cottco brand was undiminished and that the change was unwarranted. Management argued however that it gave the notion that the company was only into the cotton business understating the extent of the company’s size and diversification. This, they said, weighed negatively on stakeholders perception of its value.

Zimbabwe Sun also changed its name to Africa Sun in May, motivated by a desire to garner an African appeal as it expands into the region.  Regional diversification has given a lifeline to most companies’ earnings as the local economy continues to crumble.

 In this quest which appears inspired by a Rhodes’ Cape to Cairo vision, the leisure group reported that it targets an increase in total rooms under management to 8 500 by 2012. Circle Cement not to be outdone re-branded to Lafarge, a name recalling that of the French-based parent company.

Judging from the popularity of the word Africa, a ‘pan-African’ craze appears to have gripped the country. The major drive is evidently to get an African appeal as domestic companies roll out into the region and beyond in pursuit of more vibrant markets and growth.

If that is so, then maybe Zimplow after an impressive mechanisation bankrolled performance may want to consider switching to a more afro centric name; Afroplow, as it expands into the region.

Or should we be  imagining what will happen if insurance holding giant Zimre were to join the craze and replaced “ZIM” in its name with “AF”. Stakeholders may well need to brace themselves for a wrangle similar to the one taking place in domestic soccer circles between the two CAPS formations.

By Ronald K Nyawera