EQUITIES surge dropped this week weighed down by losses in Delta Corporation and other quality counters on the market as foreign investors cashed out with the value of stocks coming down from a high of US$11,4 billion to US$10,5 billion on Wednesday.
However, investment analysts say the market’s decline is a momentary development and would reverse with shares rallying yet again. Others say the market is losing some steam after doing too much too soon.
A survey by Investor’s Report, a local equities and stock market analysis website, shows that a total 60% of listed counters are trading above their book values, with significantly high P/Es. Only 40% of ZSE listed companies as at August 31, according to the survey, were trading below their price-to-book values with the remainder trading at premiums to their underlying values. Yet despite seemingly high valuation metrices, analysts are betting against the bearish trend saying stocks will start gaining soon.
Currency volatility and fears on the market have forced investors and fund managers to pile into equites as a strategy to preserve value amid inflation worries. Before the losses in Delta, investors were buying into the seemingly overvalued counter. “Its not about fundamentals anymore,” an analyst said. “Whatever is the value of the market has to be discounted at parallel market rates.”
Shares tumbled on Monday closing 2,35% weighed down by losses in big cap Delta and selected counters and fell further on Tuesday, tumbling 4,94% to close at 371,31 points as Delta losses mounted. On Wednesday it was the same story with market closing at 1,13% lower.
But investors say this brief lull necessitated by profit taking by some foreigners. The market peaked to US$11,4 billion, a figure higher than Zimbabwe’s total GDP of US$10 billion. Delta lost 8,7% on Monday to close at US$2,70.
The stocks’ losing streak started in last Friday’s trade losing 1,4% to close at US$2,95.
This week the trend continued with counters such Padenga, Axia, CFI and Barclays shedding off value.