Reasons for the decline last week varied from low liquidity levels to the resurrection of the money market which has created room for more asset diversification.
“The market opened the week firmer on the back of widespread gains. The industrial index was 6,53 (4%) up at 154 points,” ZABG stockbrokers said.
A total of 23 counters traded strong versus only three fallers. Gains where led by Apex and Trust Holdings, which were both up 43% after adding US$0,15 to US$0,5 and US$0,3.
“Resources also opened the week higher as the mining index surged 7,16 points (4%) to 183,27 backed by gains in Hwange and Rio Zimbabwe,” said Zabg.
Kingdom Stock Brokers (KSB) this week said going forward, investors need to critically study fundamentals of stocks that they are interested in as recent developments on the equities market clearly testify to the consequences of imprudent investment decisions.
“Expert technical analysis of stocks was highly rewarding given the volatility that continues to characterise the local bourse,” KSB said.
EFE Securities this week said it thought that the spirit of stability and certainty should spread into the stock market, as there were no major surprises expected during the year.
However, they said the re-introduction of the money market may reduce the glitter of the stock market as the only sensible investment option in the country.
EFE said: “The local financial markets are fast becoming like the other countries’ markets where the stock market is one of the many investment options available.
“However, the reduced trading costs should encourage higher trade volumes as the costs will be low enough to encourage higher trade activity.
“With the current state of the economy where most companies are still trying to recapitalise to take advantage of the gaps in the market, we doubt many will look attractive unless their operational and financing plans are in order.”
Market analysts said the reduction of transaction costs on ZSE to 3,21% from their current 7,5%, to be effected soon, will offer an incentive to investors as they would be able to switch from those counters that they would perceive to be overvalued, going for those they believe to be undervalued at a reasonable cost.
Meanwhile, the local money market that had been rendered irrelevant as an alternative investment market by hyperinflation is now emerging out of the woods and providing an avenue for less risk investments, with January traditionally a quiet month on the stock market.
Activity on the money market is expected to pick up this year, with the Grain Marketing Board (GMB) grain bills being another alternative paper to invest in. Given the huge appetite for funding across the economy, more debt paper is expected to be introduced onto the money market by both public and private enterprises.
GMB has indicated that it will raise another US$5 million through an open market tender before the end of January. This would be the third tender to be contacted by GMB since the introduction of the multi-currency environment in February 2009, as the grain purchasing institution makes endeavours to ensure that it pays farmers for grain deliveries.
In its November and December tenders, the institution managed to pick US$1,63 million and US$2,95 million at a weighted average cost of 21,32% and 23,49% respectively, all with a 90-day tenor.
The GMB bills are secured by CBZ. According to GMB projections, the country will have a grain deficit of 300 000 tonnes during the current year and a proposal to procure this maize has been done at a projected cost of US$300 per tonne.
The 90-day Grain Bills have a prescribed asset status. The on-coming tenders are likely to receive increased support from the market given the government’s move for pension funds to meet prescribed asset ratios.