The Zimbabwe Stock Exchange (ZSE) is expected to end 2015 in positive territory with the mainstream industrial index seen putting on approximately 10% to close at around 180 points, latest Invictus Securities’ Zimbabwe economic outlook report shows.
Taurai Mangudhla/ Fidelity Mhlanga
The growth, Invictus believes, will be driven largely by the recovery in valuations for counters that were heavily sold towards the tail end of 2014, among them the large cap stocks like Delta Corporation, OK Zimbabwe and Innscor Africa Ltd.
Another factor, the securities firm said, was also due to actions of bargain hunters as cheap valuation will inevitably attract investors to Zimbabwe especially given the continued injection of liquidity from developed markets.
“We, however, expect this to be on the back of slower activity with both volumes and turnover maintaining their declining trend,” said Invictus.
“Our view is that the ZSE still offers a great opportunity for long term value investors.”
It said stock picking in 2015 would be driven by a focus on companies with strong management teams, dominant market share, strong balance sheets and cashflows.
Invictus sees Zimbabwe’s re-engagement with the international community gathering pace, notwithstanding the slow progress on the removal of sanctions, especially by the US as well as growing interest from international investors as evidenced by the increasing number of trade missions with the possibility of an increase in foreign direct investment.
The securities firm said direct aid to government is expected to help create some fiscal space, but will be inadequate to satisfy government’s cash requirements.
Slowing consumer demand, tight liquidity conditions and weak commodity prices are seen remaining the major challenges weighing down corporate earnings as well as valuations in 2015. Cost-cutting, process optimisation, restructuring and consolidations are seen dominating as companies seek efficiency to remain profitable.
“Bargain hunting and cherry picking of value stocks as well as corporate transaction type trades to dominate activity on the ZSE,” said Invictus. The report comes as the stock market witnessed a moderate recovery in February, rising 0,22% to close the month at a total market capitalisation of US$4,73 billion.
Another securities firm Inter-Horizon (IH) Securities’ monthly report, the industrial index rose 1,37% to 167,16 points on the back of a gain in Delta and Innscor of 3, 51% and 3% respectively.
Large-cap Seed Co also recorded a 10,53% gain in February.
The mining index plunged a further 4,73% in the month to 55,38 points, weighed down by losses in Falgold and RioZim of 16, 67% and 33,33% respectively.
Other notable losses were seen in CFI Holdings dipping 23,08%, Cafca went down by 20% and Lafarge 20%.
The most significant gains in the month were recorded in Radar Holdings which picked by 50%, Zimplow swelled by 36,36% with Masimba Holdings, going up 33,33%, Powerspeed (30,56%) and Barclays (28,57%).
Turnover rose 93,53% in February to US$34,35 million, with average daily trades of US$1,72 million recorded for the month. The most significant contributions to total value were Delta (46,05%), Econet (33,44%) and Seed Co (3,46% ).
Total volume traded went up 97, 73% to 107, 9 million shares.
“We expect flat to marginal growth in the top-line, supported by defensive lines in National Foods and some recovery in Innscor’s fast foods segment,” said IH in its report.
IH said the month of March should bring more clarity with regards to the performance of the agricultural season, following the imminent release of crop assessments from the Ministry of Agriculture.
“Early indications are that yields have been negatively affected by initial heavy rainfall, followed by a dry spell in the second half of the season. We expect the market to trade in a relatively subdued fashion amidst a lack of any catalysts,” reads the report.