A BULL run on the Zimbabwe Stock Exchange (ZSE) is seen continuing into the year as fund managers snap up shares and avoid near-cash assets as uncertainty heightens ahead of next year’s elections.
By Chris Muronzi
Shares are seen rising further in the short to medium term as uncertainty over the newly introduced promissory currency continues.
The mainstream industrial index rose 46% in Q4 while the resources index rose 119% in the same period.
Investment analysts say traditional stock picking at the beginning of the year has proven to be useless as fundamentals are being ignored.
“What we are seeing is a different ball game. Fundamentals are not applying, hence we are unable to make sound recommendations on which stocks to buy. Most stocks are already trading above their values,” an analyst said.
“We normally do fundamental analysis of the counters before attaching buy or sell recommendations. We note that the bulk of the shares are already trading at premiums to their NAVs (net asset values) and intrinsic values.”
The central bank last year issued a currency — bond notes — it claimed is at par value to the US dollar amid concerns the promissory currency did not have real value to warrant parity to the American unit.
The authorities insist the bond notes are backed by a US$200 million Afreximbank facility the government is yet to make public. Since then, interest in equities has been widespread across the bourse.
“Interestingly, this interest has largely been driven by local investors while we have seen the majority of the foreign interest being on the disposals side. We are more than convinced that a surge in local demand is being spurred by the fear of the introduction of a surrogate currency in the form of bond notes,” the analyst said.
This, analysts say, has seen funds shifting to equities.
Fund managers, who had adopted a general wait-and-see attitude owing to the dismal state of the economy, weak investor sentiment, poor government economic policies and Mugabe’s advanced age and lack of a succession plan, have been left with no choice but to move cash into safer investment classes.
“As a consequence, we are seeing funds migrating from cash and near-cash assets into equities. This, in our view, has been the primary driver of the market gains and is now being augmented by returning foreign demand in selected stocks,” the analyst said.
But the bulk of foreign investors have been liquidating their positions.
Another analyst said in the long term some sort of price correction would occur when fundamentals come into play.
Repatriation of dividends and payments to foreign investors is proving a nightmare since the beginning of the cash problems. The resources index was flat Monday, gaining 6,43% on Tuesday to close at 59,09 points.
Although some of the counters are already trading at peak prices, analysts say fundamentals have been ignored as most companies are already trading above their values.