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Stocks open year softer

Stocks opened the year weaker with a handful of shares exchanging hands in the first week of trade this year weighed down by losses in Delta, Econet and Old Mutual and uncertainty over the future. The mainstream industrial index plunged 2,10% to close at 326,05 points.

By Chris Muronzi

Delta stock fell 6,25% on Tuesday to close at US$1,5 but gained 3,3% to close at US$1,60 the following day. The stock has been on the decline since November and analysts see the counter giving up additional gains into the year. On the same day, Econet gave up 2,34% to close at US$0,90. But Old Mutual was the biggest loser, tumbling 14%.

The resources index remained unchanged at 142,42 points. The mainstream index on Wednesday gained 0,4% the following day helped by gains in Delta and Meikles. Delta went up 3,3% to close at US$1,5 and Meikles added 0,34% to close at 0,29 cents.

On the downside, CBZ gave up a whopping 19,67% on Wednesday to close at 0,12 and Old Mutual down 2,05% to close US$4,6.

Analysts say the market had become overvalued with price-to-earnings (P/E)s as high as 400 for some stocks. As at December 31, only 16 counters on the Zimbabwe Stock Exchange (ZSE) were trading below their price-to-book (P/B) values with the rest trading at premiums to their P/B with some such as BAT trading at 60. According to rankings by online stock portal the Investor’s Report, only 16 companies on the ZSE were trading at a discount to their book values while the remaining counters were trading at 3x premiums to their price-to-book values to December 31. P/B premiums ranged from 3-60 for the counters.
Some companies had P/Es as high as 400.

Financial services firm IH Securities warned at the end of November last year that blue chips would give up some gains going forward, placing sell recommendations on many blue chips such as BAT, Econet, Delta, Innscor, Seed Co and the rest of the Innscor-linked counters, which had until the military intervention of November enjoyed a fine run.

BAT, which peaked at US$37, is seen coming down significantly with a target price of US$8,17. The counter, according to IH, has a downside potential of 77,9%.

Delta Corporation was seen giving up gains by as much as 46.8% while Econet is seen coming down 49,9%. Stocks are now valued at just above US$9,4 billion from a peak of US$17 billion in November.

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