ZSE free-fall bottoms out

Exchange has bottomed out, turning the bourse into a fertile ground for bargain hunters.
In a report released last week, Interfin said most of the top 10 blue chip counters were trading near their 52-week lows, making them attractive. The trading would be dominated by foreigners who have deeper pockets than locals recovering from the effects of 10 years of economic instability.
Interfin said most counters had lost from 25 to 27 percent of their value on a year-to-date and all-time basis, making them targets for bargain hunters.

The ZSE industrials are trading 15 and 17,5 percent lower than their year-to-date and all-time high levels, with the value of market capitalisation falling 11 percent to US$3,98 billion in the 10 months to October.

But the turning point could have been October when the market registered net purchases, after recording net sales in succession between August and September.
But the US$11,7 million of the US$15 million net purchases was an investment by Tiger Brands of South Africa, which is not a portfolio investor, when it increased its shareholding in National Foods.
Going into the festive season analysts do not see major improvements in respect of capital inflows on to the local bourse, given the ongoing debt crisis gripping Europe and the traditionally slow month of November.

But equities analysts predict bargains at premiums since most counters significantly lost value; it is the most opportune time for bargain hunters to strike.
“However, the volumes trading at these levels are thin and premiums will have to be paid for size,” said Interfin.

“Having said that, market prices are usually the starting point for negotiations of block trades and prospective buyers will benefit from the current weakness (in share prices).”
Of the ZSE’s top 10 counters ABC Holdings, CBZ Holdings and Barclays registered the biggest losses at 31, 33 and 44 percent despite the fact that most blue chip firms posted strong results.

“Resources stocks were hit even harder, losing 54,6 percent and 58,4 percent of their year-to-date and all-time peaks respectively because of the upheavals related to the declaration of stiffer indigenisation parameters.”

Early this year the ZSE had more potential to attract foreign investors on the anticipated strong economic growth, revenue and earnings of the listed firms.
The momentum of capital flows into Zimbabwe slowed as the year progressed, amid concerns about indigenisation policies that scared foreign investors.

“The turning point was the debt crisis in Europe which gave rise to risk aversion and a reduction in exposure to frontier markets and the ZSE. Many funds with exposure to the ZSE suffered redemptions and this is illustrated by net foreign sales in August and September 2011.”