Bearish trend continues

THE Zimbabwe Stock Exchange (ZSE) has failed to find inspiration to break the bearish grip that has held the market hostage since January, as selling pressure in blue-chip stocks intensified last week.
On Wednesday, the mainstream industrial index was down 2,5 percent to 114,41 points from a week earlier, uninspired by both the recent 2016 Fiscal Policy statement that targets 2,7 percent economic growth and the current reporting season.
The mining index of four counters slipped 3 percent to 21,51 points following losses in Bindura Nickel Corporation Ltd (BNC) and Hwange Colliery Company Limited.
BNC fell 3,8 percent to US1.25c after reporting a net loss of US$3,4 million during the half-year to September 2015 compared to a profit of US$8,5 million a year ago.
A stock market is considered bearish when it loses at least 20 percent from its peak levels inside a year.
The ZSE’s main index has tanked 30 percent year-to-date while minings have slumped 70 percent.
Since January, total stock market capitalisation is down more than 30 percent to US$3,05 billion, costing punters over US$1,3 billion investment losses.
Analysts say the US$4 billion national budget recently released has done little to stimulate investor appetite in stocks, as it neglects key issues that drive production and domestic demand.
“Paltry allocations to the development budget put paid to any expectations of an early economic rebound,” said stockbrokers, EFE Securities in a market note.
EFE Securities added that declining revenue flows to Treasury – estimated at US$3,8 billion next year – against huge recurrent expenditure budgets, were stifling Government’s ability to drive developmental projects and economic growth.
Recurrent expenditure – everyday Government expenses on salaries and overheads – constitutes 92 percent of Zimbabwe’s 2016 spending, crowding out capital expenditure, funds used to boost economic production and competitiveness, at just US$315 million.
In the week to Wednesday, heavy capitalised counters continued to fall with diversified conglomerate, Innscor Africa Holdings Limited tumbling 16 percent to US28,50c, its lowest in a year.
Year-to-date, the stock has plummeted 52 percent.
Seed maker, SeedCo Limited dropped 2,2 percent to US85c after narrowing half-year to September 2015 net loss to US$5,6 million from US$7,6 million.
Volumes climbed 11 percent on early maize seed sales in Zimbabwe, Kenya and Botswana.
Brokerage firm, IH Securities forecast SeedCo’s margins to remain under pressure, falling to 44 percent at full year from 46 percent last year, largely due to poor rains, low commodity prices and reduced input programmes by the governments of Zimbabwe, Zambia and Malawi.
SeedCo’s business model leans heavily on public input programmes.
However, Government has this year cut its order from the company by 50 percent to 3000 metric tonnes while the Zambian government project is down 39 percent.
“We have therefore, forecast a 4.1 percent year on year contraction in revenues from US$94.7 million in full-year 2015 to US$90.8 million in full-year 2016 taking into account all the challenges that the Group expects to face in the second half.
“We estimate lower margins due to an expected increase in research and development as well as currency devaluation, especially of the Zambian Kwacha which to date has fallen by 40 percent,” said IH Securities.
OK Zimbabwe Limited, the country’s largest retailer, fell 6 percent to US4.50c on the back of a 72 percent net profit plunge to US$1,2 million during the six months to September 2015.
Weak demand pushed the market’s top capitalised stock – Delta Corporation – 3 percent lower to US71,5c having touched an intra-week low of US70c.
Spirits manufacturer, Afdis Limited which has enjoyed a good run over the last few months, caught up with the market weakness resulting in the group shedding 3 percent to end at US56c.
On the upside, Amalgamated Regional Trading Corporation (ART) led risers gaining 30 percent to US1c as the group reported narrower losses to September 2015.
The stock is 233 percent firmer since beginning of the year.
Financial institution NMBZ Holdings was 9,3 percent stronger as renewed interest in financial stocks continued.
Insurance giant FML rose 4,5 percent on sustained demand while new listing Simbisa was 0,6 percent stronger at US15,60c.