THE Zimbabwe Stock Exchange (ZSE) recovered lost ground in the third quarter of 2012 as foreign investors shrugged off the ongoing political stalemate, poor domestic economic performance and low domestic liquidity to record a 10% growth in the last three months.
Report by Clive Mphambela
According to statistics provided to businessdigest by Imara Edwards Securities, the ZSE total market capitalisation rose from US$3,693 billion in June 2012 to US$4,079 billion as of close of business on September 25 2012 driven by strong price recovery in blue chip counters such as Delta, OK Zimbabwe, AICO and BAT.
“Whilst there is no liquidity on the local market, we have seen dominant trading activity largely by foreign investors on the market,” Imara Edwards Securities CEO Tedias Kasaira said.
“The market has also seen increased participation by the large local funds such as NSSA, Old Mutual and Fed Nominees.”
He said trades have been concentrated in beverages manufacturer Delta, FMCG and fast foods giant Innscor and leading telecoms firm, Econet, whilst second line stocks such as retailer OK Zimbabwe and tobacco processors BAT have attracted keen investor interest.
In the financial services, there has been appetite in Fidelity on the insurance side and CBZ on the banks.
Kasaira said investors were keen on well managed, well capitalised entities that have clear strategies and above all very few or any boardroom issues.
“Investors are generally staying away from companies that are perceived to be unstable, either financially or in the boardroom,” he said.
Kasaira however said the market value would not increase much further than the current level in the last quarter of the year as socio-political issues come sharply into focus as the country draws closer to the constitutional referendum and possible elections next year.
“I do expect the current trend to hold and perhaps we should see the market strengthen further to close on a market cap of between US$4,2 billion or US$4,3 billion. Conclusion of the constitution making process and a clear direction on the election road map should give a further impetus to the market,” he said.
Kasaira said clarity and closure needed to be brought to the current indegenisation debate, which was keeping investors on the sidelines.
“If we sort out the issues surrounding indigenisation and economic empowerment, the Zimbabwe stock exchange has potential to take off quite significantly in 2013,” Kasaira said.
According to Imara’s figures, Delta Corporation’s market capitalisation surged 16% from US$775 million at the end of June to US$902 million as at September 25 after the share price firmed to 75US cents per share from 65US cents at the end of the last quarter.
Agro industrial processor AICO’s market value went up 36% to US$64 million from US$47 million whilst BAT’s worth surged 58% in the quarter to US$71 million from US$45 million at the half year.
Other notable gains were recorded in the mining counters where Bindura Nickel Corporation market capitalisation recovered from US$32 million to US$36 million following a successful US$23 million rights issue while Rio Zim market value rose by US$23 million to US$34 million as the business recovers from years of decline.
The industrial index has firmed in line with the recovery in market values.
The industrials index was at 131,96 points in June firming by 8% to 142,62 points as at September 25 2012 whilst the minings have posted a 28% recovery to 96,64 points from 75,70 points at the end of June 2012.
Yona Banda CEO of Ecobank Asset Management said trades by foreign investors sustained the market over the last quarter.
“Performance of the market in 2013 is largely dependent on the political developments unfolding in the country. Given the fact that foreign activity constitutes the majority of trades, we would expect increased activity if free and fair elections are conducted, decreased activity in the event of a disputed election outcome and the status quo to prevail in a situation where the GPA lifespan is extended,” he said.
Banda said local fund managers would keep the market in positive territory at current levels.
“I expect the ZSE market capitalisation to be between US$4,bn and US$4,4bn by close of year, for the reason that fund managers will want to close and report positive numbers on their portfolios,” he said.