Zimbabwe Equities renew rally

Stocks surged 14,5% in August buoyed by strong demand for shares in the market and limited supply of securities as fund managers and investors race to preserve value amid inflation fears.

Chris Muronzi

The market had continued on an upward trend in the month of July, gaining a further 1,55% to close at a total market capitalisation of US$5,98 billion.

The bull market had prior to that continued in June, as the market rose 20,09% m/m to close at US$5,99 billion. Before that the market — whose capitalisation as of yesterday was US$6,8 billion — had also rallied in May and April, as well as months before that.

The mainstream industrial index rose 14,5% in August, helped by a shortage of stocks as investors hold on to scrip.
Appetite for the blue chips Delta, Econet, Innscor, Natfoods and Seed Co was renewed this month as investors sought safety in equities.

Although official inflation shows a decline, the market is not convinced in the face of worsening US dollar/RTGS discounts in the market. In some cases, rates as high as 27% are quoted for cash.

As a result, the market closed Wednesday at US$6,6 billion, an all-time high since dollarisation.

Delta had a market cap of US$1,7 billion, with Econet trailing at just under US$1 billion. This is despite already higher valuation metrics for most companies at the end of July.

The latest rally comes after another surge in the quarter to June.

At the end of June equities seemed poised to break the US$6 billion market capitalisation record with investors piling further into equities.

Market analysts say once the US$6 billion record is broken, the market could start testing its resistance.

The ZSE’s all-time peak since the adoption of the multi-currency system was US$6 billion in terms of market capitalisation in May 2013.

“We are approaching elections and the last time we had polls, we reached a peak point for the market. Also, asset managers are getting a bit of funds from clients,” an investment analyst said this week.

The mainstream industrial index gained 19,9% in June as asset managers took positions in equities and only 3% in July.

In May, equities jumped 16,8% to close at 162,34 points, propelled by a glut of Treasury Bill maturities and inflation fears in the Southern African country.

This comes after another bull run in the fourth quarter of last year in the wake of reports central bank chief John Mangudya was forging ahead with plans to introduce bond notes.

“The market has also witnessed gains in small caps. In the early days of the rally, blue chips were propelling the gains and we were used to gains of 3% in a day’s trade. Now, the gains are becoming marginal,” the analyst said. “At the moment, investor focus has moved away from counters with a huge impact on the index to counters with small caps.”

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