Mixed Trading in Property Counters on Stock Exchange

PROPERTY counters on the Zimbabwe Stock Exchange (ZSE) had mixed trading since the local bourse resumed trading last Wednesday.

Common investment strategies suggest that in a hyperinflationary environment, investors hedge against negative real returns by seeking refuge in non-interest bearing assets such as equities, the property market and the currency market.

Property which is the safest form of investment under the current hyperinflationary environment were expected to be among the most sought after counters but have been lagging behind telecommunication and mining counters.

Dawn properties shares this week traded between US$0,2 and US$0,4. Mashonaland Holdings also traded in the same range during the period under review as selling pressure coming from companies that are looking for working capital as the banks do not have foreign currency to give to them increased.

Pearl Properties was ranging between US$0,6 and US$0,8 while Murray and Roberts traded mixed between US$0,5 and US$0,9.

Other property linked companies such as Larfarge and Pretoria Portland Cement Company (PPC) had attracting offers.

Larfarge one of the counters with the most volumes traded ranged between US$1 and US$1,40. PPC which is also listed on the Johannesburg stock exchange traded between US$150 and US$200.

Market analysts said property counters such as Dawn, Pearl Properties, Mashonaland Holdings were expected to trade mixed in the long term as both local and foreign investors have defined policies of how the market is going to operate.

Stock brokers said statistics are revealing a dilemma or self-limitations of investors in the diaspora considered privileged with disposal incomes which those in Zimbabwe lack, because of the deteriorating economic conditions.

Very low on investment and very high on subsistence, An estimated 20% prioritise investments in a business or in buying properties. The reasons often cited for the failure to invest had been the unstable political and economic climate.

Counters such as Murray and Roberts and Larfarge are expected to improve and be more attractive because of the demand for cement and increased construction in neighbouring south Africa ahead of the soccer world cup next year.

The current boom in the construction and infrastructure sector in South Africa is expected to continue well beyond 2010, as the country plays catch up after its under-spending in recent years.

“It is not a 2010 story alone. South Africa has been under-spending. We are running out of production capacity. So it will be unrealistic to expect the economy to grow at four to five percent if we don’t boost our capacity,” Peter Steyn, head of construction and infrastructure at Absa Corporate and Business Bank was  quoted in the media.

Future growth is expected to be driven by investment-related activity such as power generation, road infrastructure and water-related investments within the public sector.

Although no figures has been made available over the past two years, as to how much activity on the property sector has declined by, market experts estimate the it had done down by over 60%.

The depression in the property sector has significantly affected government revenue collection projections the then acting Minister of Finance Patrick Chinamasa said.

The property sector is facing low demand in purchasing houses and property-related fixed assets due to high building costs.

Suppression of the economic activity mainly due to exchange rate misalignment resulted in viability problems for most companies.

This consequently contributed to the poor performance of corporate tax.

Whilst returns on properties had been exceeding inflation, few in Zimbabwe consider buying a property as an investment than securing a family home.

Many who buy more than two properties would want to invest in something else but have no adequate information on what else to invest in.

When markets engage in a rip-roaring bull market, there is nothing that matches the excitement and the sheer speed with which investors can make money on the stock market.

Whilst property prices often move in a group, if the stock market index were to double this would be the average of a vast spectrum of movements with many shares rising far more than 50%, spreading the returns across many counters.

BY PAUL NYAKAZEYA

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