ZSE slips back to red

A BID to ease a tight cash crunch by introducing bond notes failed to stimulate activity on the Zimbabwe Stock Exchange after market capitalisation declined to US$2,88 billion in May from US$3,03 billion in prior month as heavyweights registered lower earnings due to an underperforming economy.

Bernard Mpofu

The equities market mainstream industrial index slipped to 104,7 points in May from 105,79 points in April dashing hopes of a bull run that was preceded by 14 months in the negative.

Delta, the largest company on the ZSE by market value, last month recorded a 12% decline in annual profit to US$80 million after revenue fell 7% on weakening consumer spending.

Revenue from continuing operations in the full year ended March 31 was down to US$538 million compared to US$576 million the in the previous year.

Earnings per share (EPS) dropped 13% to 6,49 US cents.

The board declared a special dividend of 0,95 US cents per share despite this underperformance, signalling a gloomy outlook for investors. The group also declared a final dividend of US$2,35 cents per share.

The country’s largest mobile phone operator Econet Wireless on Wednesday reported a 42% fall in year end after tax profit to US$40 million, due to a high depreciation charge and the effects of a government-sanctioned tariff cut.

Last year, government reduced voice tariffs by 35%, a 25% duty on handsets, and added a five cents levy per transaction on mobile money transfers as treasury widened its revenue base.

On the upside, the mining index advanced to 25,54 points from 20,16.

In April the market returned to the black in the month of April, as it rose for the first time since February 2015; total market capitalisation closed 7,91% higher month-on-month US$3,03 billion.

While this came as sweet music to investors who were considering reducing their exposure on the equities market, the slow pace in effecting structural issues besetting the economy could bring back bearish sentiments on the ZSE.

The industrial index was up 8,38% to 105,79 points buoyed by gains in all heavyweights with BAT, up 8,84%, Delta up 24,44% and Econet up 2,33%. The mining index was up 3,23% on the back of gains in RioZim and Bindura of 5,77% and 2% respectively.

Concerns over the indigenisation law, high labour costs among other factors has kept investors at bay while they consider other frontier markets.

Nearly US$2 billion in shareholder value was lost year-on-year in the quarter to March compared to the same period last year as investors fret over indigenisation regulations compelling foreign investors to sell controlling 51% equity stakes to indigenous Zimbabweans.