Bearish trend to continue to year end

ANALYSTS predict that the bearish trend on the Zimbabwe Stock Exchange (ZSE) will continue until the end of the year as deflationary pressures continue to mount.
On Wednesday, the industrial index fell 0,09 percent to 131,46 points, while the mining index remained flat at 23,68 points.
The mining index, which has only moved marginally since October 1, has however dipped 66 percent since January.
As economic growth in China slows, demand for commodities has also declined.
Local prices continue dropping as well.
Last week, the Zimbabwe Statistics Agency (Zimstats) reported that the country’s year-on-year inflation slid 0,34 percentage points to minus 3,11 percent in September.
An economy with an inflation rate that is below zero is considered to be in deflation.
Zimstats believe that declining food, beverages, clothing, housing, maintenance and communication prices have fed the deflationary cycle.
Experts say investors often sell off their holdings in deflationary environments since the return on investment tends to be negative.
Stockbrokers EFE Securities contend that during the fourth quarter of the year, the market is often affected by profit-taking investors.
“As the final quarter of the year continues to progress, the market is increasingly set for a heavy losing year as the industrials are sitting on a year to date loss of 19,48 percent while the minings are down 66,98 percent with virtually no prospects of a stimuli for a market rebound,” said EFE Securities in a recent report.
Most stocks, with the exception of blue-chip and mid-tier stocks such as National Foods Ltd, SeedCo Ltd, BAT and Dairibord, continue to take a beating.
Last week, Econet Wireless Zimbabwe (EWZ)’s share price closed unchanged at US27c after reporting that its profit for the half year ended August 31, 2015 plunged 47 percent to US$23,5 million from US$49,8 million a year earlier.
Voice income, the company’s traditional cash cow, slumped 20 percent, as subscribers switch to cheaper communication platforms such as WhatsApp.
Margins have also been affected by the 35 percent tariff cut effected by industry regulator Potraz at the beginning of the year.
Econet is now actively growing its overlay services and broadband business in order to grow profits.
Market watchers however forecast that the company’s revenue and profit will fall by 21 percent and 49 percent respectively in the full year ended February 29, 2016.
At US27c, EWZ’s shares are trading at their lowest in a year having touched a high of US85c.
Year-to-date, the stock has plummeted 55 percent.
As the economy slows and demand slackens, companies are finding it tough to remain profitable.
Innscor Africa Holdings and Delta Corporation have been hard hit by low consumer demand.
Innscor Africa Holdings Ltd’s shares, however, have risen US2c to US60c since reporting last month full year revenue to June 2015 fell 18,6 percent to US$814 million from a record US$1 billion a year earlier.
At current levels, the stock is one of a few that have avoided slipping into the red this year.
SeedCo is up 1,8 percent year-to-date, BAT has risen 5 percent while Dairibord Holdings Ltd has gained 3 percent.
Delta Corporation, the country’s biggest beverage maker, has cut prices by more than 20 percent in the past year, but that has not been enough to inspire confidence in the stock.
For several weeks, the share has struggled to trade above US85c, closing down 0,04 percent at US82c in Wednesday trading.
Delta Corporation has therefore dropped 19,3 percent year-to-date.
At mid-week, life assurer Fidelity Life closed unchanged at US9c after shareholders on Tuesday ratified the company’s plan to take over CFI Holdings Ltd’s US$18 million debt in exchange for an 834-hectare piece of land in Harare.
Fidelity Life plans to develop residential stands at the Langford Estate, a development officials say will boost the balance sheet to US$500 million within the next few years.
Shares of Fidelity Life are among the best performing on the ZSE this year, up 12,5 percent since January.
Over the past 52 weeks, the stock has reached a high of US13c.