‘Foreign investors see value in Zim market’

This became apparent after the recent Imara Zimbabwe Investment conference attracted significant foreign investor support despite the gnawing negative sentiment surrounding Zimbabwe.

According to Imara Edwards Securities MD, Thedius Kasaira, the conference, the fourth since dollarisation, was well attended and was better than last year’s.

Kasaira’s impression was that foreign investors were now willing to invest in Zimbabwe as they saw a lot of value in the market, but the political uncertainty still needed to be addressed.

According to Imara, foreigners were eying investments in manufacturing, retail, mining and construction or infrastructure development.

“They  (foreigners) are not worried much about indigenisation, but they want clarity and would like to see consistency,” Kasaira said.

Trends on the ZSE show that there has been a resurgence in the volume of shares traded in the last two months compared to total volumes traded in the first quarter of this  year.

Latest ZSE figures show that a total 964 million shares worth US$74 million changed hands in April and May 2012, whilst total volumes traded in the first quarter were 799 million shares worth US$119 million. The increase in volumes is seen as an indicator that investors in general and foreigners in particular have rekindled their keenness to buy into the ZSE, which according to players in the market seems to have bottomed out and is now placed for an upward trend.

Kasaira said there was increased activity on the market, but trades were still dominated by the large capitalised counters.

“The trend in the last few months has been mixed. There has been a lot of foreign-to-foreign trades, but there are more local individual sellers in the market at present. For example, the Delta US$20 million trade a few days ago of US$15 million was between locals and the US$5 million was sold by a foreigner to local investors. On Monday, US$2 million traded in Delta and was between foreigners selling to locals,” he said.

Kasaira said sentiment on Zimbabwe might appear negative, but emerging market funds traditionally look for cheaper markets where they get a large return when things normalise.

“Most companies’ earnings are growing every year, the managements of these companies are good and the forecasts on all the good companies are bullish. The local use of the US dollar has also given them comfort as there are no currency risks involved in trading on the ZSE,” he said.

An analysis of ZSE figures for the first five months of the year is quite revealing. While foreign investor participation dominates the lion’s share of trades in the first quarter, this is now being matched by local interest over the past two months.

MMC Capital director, Edward Mapokotera, said the resurgence in trading volumes was unlikely to be a temporary phenomenon, but was indicative of renewed interest in the ZSE. He said the large deals recorded in the last two months were in fact balanced between foreign and local buyers, indicating interest across the board.

“ Investors are appreciative of the fact that Zimbabwe stocks are now cheap, especially on a price-to-earnings basis, and for some, even in terms of net asset value. Foreign investors are particularly keen on those companies perceived to be well capitalised and well run.

“Those that will not need shareholders to put in more money and that already have solid operations. They are highly selective, but interest is growing,”  he said.

 

Mapokotera said that the recent Imara conference on investment also added to the interest and focus on Zimbabwean stocks.

The ZSE figures show that there was heavy buying into cheaper shares,  which may be indicative of investors taking short-term trading bets on share weakness and offloading at firmer prices. But Mapokotera dispelled this.

“These guys are buying into volume on weakness and sometimes this may appear speculative. We have seen a mixture of both foreign and local buying interest, and we do not think on the part of foreigners, the trades are speculative. There are foreigners who are keen on taking long-term positions in companies such as Dairibord,” he said.

He observed that the industrial index, at around 133  points, was at the same level it was in May 2009, while the market capitalisation of the ZSE seemed to have bottomed out.

“We do not see any further weakness in the market. We think the ZSE market capitalisation will not go below the current level and due to current buying trends, the value of the market will creep up,” he said.

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