Equities in 8 month stutter

Business reporter
STOCKS fell for the eighth straight month in October as turnover dropped 27,5 percent month-on-month to reach a new six-year low of $12,9 million.
Turnover on the local bourse last reached lows of $11,6 million in April 2009.Whereas turnover averaged $586 360 per day last month, the total value of shares changing hands in September oscillated around $17,8 million. This year’s highest monthly turnover of $34,8 million was recorded in February. Year-to-date, a total $172 million worth of shares have been traded.
By the end of October, the mainstream industrial index dipped 0,83 percent to 130,83 points on continued macro-economic concerns, particularly on the current deflationary trend and reduced power generation output.
The index has plummeted 19,6 percent since the beginning of the year, while the mining index declined 3,2 percent to 23,57 points on the back of a 7 percent loss in nickel producer, Bindura Nickel Corporation.
For the month of October, Delta eased 1,2 percent.
Innscor and Econet rose 2,5 percent and 0,2 percent, respectively. Fidelity Life, which rose the most in the month, jumped 22,7 percent. Shareholders of Fidelity last month approved an $18 million land swap deal with CFI Holdings. CBZH rose 19 percent, Afdis climbed 17,5 percent, Ariston increased 15 percent and NMBZ rose 12,5 percent.
Turnall and Zimpapers both fell 20 percent. Tourism and hospitality group RTG declined 19 percent while NTS and Colcom closed down 15 percent and 12 percent, respectively.The weakening of the South African rand against the US dollar is also making it difficult for local companies to compete as they have to contend with cheaper imports from South Africa.
South Africa is Zimbabwe’s biggest trading partner.
“With all indications pointing to a slower than anticipated outturn for the country on the economic front, it’s no surprise that the stock market had lower takers as investors were taken aback by the gloomy outlook added to the lack of a certain course of action to curtail the economic challenges,” said EFE Securities. Telecoms giant Econet Wireless released its financial results in October, which indicated thinning revenues and profits on slower consumer demand. Delta and OK Zimbabwe are expected to release their financials this month.
However, analysts expect the results to show “a sustained trend of downward trading to more accessible pricing points”. But stockbrokers IH Securities are optimistic.
“Despite present headwinds, we do believe that there are names which have been over-sold and still hold solid business models that have medium to long term value. We lean towards names in defensive industries with dominant market share positions, low leverage and relatively healthy operating cash-flows, that have room to re-configure internal operations to streamline costs,” explained IH Securities.
While the power crisis and continued deflation is expected to affect the outlook of the stock market, analysts believe that the market is now beginning to resist bargain hunters.
“The now all too familiar story of losses played out in the month of October though the severity has somewhat reduced as some sellers start holding back citing untenable prices,” said EFE Securities.Last month, The Minister of Energy and Power Development, Dr Samuel Undenge, directed companies to cut electricity usage by as much as 25 percent to save 25 megawatts (MW) of power, as Zimbabwe goes through its worst energy crisis yet due to reduced capacity at the main hydro-electric plant at Kariba.
Fertiliser producer, Sable Chemicals, which consumes 40MW, was also instructed to scale back on its consumption.Market watchers say power cuts will slow companies’ production and chew into profits.
“We expect power issues to persist until new thermal plants have been commissioned, or the water levels at the Kariba Dam have improved,” said stockbrokers, IH Securities.
“Therefore, output across most industries will be subdued in the third quarter affecting revenues, operating costs are likely to be impacted by higher generator use affecting margins.”
The Confederation of Zimbabwe Industries has already implored Zesa to defer its planned January tariff hike.