Diamonds fail to stimulate ZSE

DIAMOND sales last month failed to tickle the market despite government promises that the controversial alluvial gems would be an Eldorado to the staggering economy.

Following official announcements that the stockpiled alluvial diamonds from Chiadzwa diamond fields would be auctioned, punters hoped the stock market would go on a bull run.

Market watchers expected a one-off sale of the precious mineral to generate a whopping US$2,7 billion.

 The August 4 auction coincidentally saw daily turnover on the bourse spiking to just over US$1 million from US$500 000.
The ZSE industrial index went up marginally 1,19% during the month to end at 132,48 points from an opening of 130, 92 points. The mining index, however, traded in the negative, down 3,34% in the month under review to close at 130,36 points from an opening of 134,87 points.

The market capitalisation for the ZSE improved slightly to about US$3,63 billion from an estimated US$3,61 billion, translating to a US$2 million gain for ZSE investors during the same  month.

ZSE daily turnover increased 22% in august to US$34, 87 million from US$28, 65 million transacted in July.
Analysts attributed the surge in turnover to investor confidence in blue chip counters such as Econet, Delta, Innscor and Seedco rather than funds raised from the diamond sales.

A fund manager with a listed company said volumes surged in August “partly” due to selling pressure from institutional investors currently liquidating their stocks to meet retrenchment obligations.

“That most companies are currently downsizing is now in the public domain. Notwithstanding the anticipated diamond sales — which many of us thought would stimulate the market, volumes during this period partly rose after companies disposed shares to meet their retrenchment obligations,” said the analyst who requested anonymity.

Independent economic analyst John Robertson, however, said the mid-month surge in ZSE volumes could have been speculative.

 “I think some investors were only expecting demand for the shares to increase in the short-term because some expected companies to declare dividends. It’s pretty much difficult to prove that the rise in volumes resulted from the diamond sales unless one can really follow the money”, Robertson said.

Finance minister Tendai Biti last week admitted that the diamond sales had failed to stimulate economic activity despite an earlier hullabaloo on their projected input to the fiscus. He said proceeds from the sale removed the Eldorado tag on the controversial gems.

Government estimated the six million carats stockpile of diamonds to be worth US$2,7 billion, raising hope that it would mark an end to the liquidity crunch on the capital market. That was not the case.

The state, according to Mines minister Obert Mpofu, received US$30 million raised from the US$56,4 million auction of one million carats of gemstones.

Bernard Mpofu