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Markets subdued over indigenisation drive fears

TOTAL market capitalisation of the Zimbabwe Stock Exchange is expected to close at about US$4 billion this year, the same level as at the beginning of the year.

This is largely a result of uncertainty around government’s indigenisation drive and lack of liquidity on the market. The release of financials over the past week has seen volumes doubling on the ZSE as the bourse rallied towards the US$4 billion mark.
In January the market capitalisation stood at US$3,9 billion before tumbling to US$3,19 billion in June after government gazetted empowerment regulations compelling foreign-owned companies valued at US$500 000 or more to dispose a 51% controlling stake to locals over the next five years.
Both the mining and industrial indices this week recorded positive gains ahead of amendments of indigenisation regulations expected to be announced by Empowerment minister Saviour Kasukuwere before year-end. Kasukuwere in June set up sector-specific committees to advise government on the controversial policy after investors shied the equities market.
Last Friday, the equities market gained 1,52% contributing to the week-on-week gain of US$3,9 billion market cap from US$3,8 billion recorded during the previous week. The total volume of trade during the period under review rose to US$18,5 million from US$9,6 million.
Three companies — Delta and Seedco — released a set of financial results that could have excited the market.
Blue chip beverage maker and distributor, Delta, recorded a 51% jump in turnover amounting to US$214,4 million revenue driven by significant demand in alcoholic drinks. According to Delta, demand for beverages, is also expected to surge during the forthcoming festive season, a traditionally peak period for the company.
The company declared a three-fold increase on cover dividend.
Seed producer, Seedco also recorded a surge in revenue on the back of rising demand of seed maize just before the onset of the summer cropping season. Gross profit margins for the company however remained unchanged following a 68% increase in overheads.
The equities market recorded the worst retreat since the use of multiple currencies last year in February after Kasukuwere announced chilling empowerment regulations.
Foreign investors’ contribution which at the beginning of the year averaged 45% plummeted to 20% after the regulations, but the last couple of weeks have seen foreign money going back on the market.
The industrial index, which started the year at a high of 156,52 points, dropped to 127,46 points by June 2010,
The mining index fell from an opening of 209,8 points to 143,08 points.
“The poor performance is as a result of investors pulling out their investments reflecting depressed investors’ sentiment over perceived financial risks, especially following gazetting of the Indigenisation Regulations on March 1,” said Finance minister Tendai Biti during his presentation of the Mid-Term Fiscal Policy statement in July.

 

Bernard Mpofu

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