Equities market continues trading in the red

significant losses.
Even though some companies released good financial results, there has been no corresponding response in terms of capital appreciation from the stock prices.
Heavyweight counters were the biggest losers as foreigners who were largely buying into these counters remained net sellers.
While the direction of the stock market has been largely determined by the liquidity constraints and policy issues, the ZSE swayed to the ripple effects of the global crisis during the past few weeks.
After the American subprime crisis that began with the bursting of the US housing bubble, the Eurozone crisis could be the next big cause of concern.
The US subprime mortgage crisis saw a rise in sub-prime mortgage defaults and foreclosures while the Eurozone crisis is also threatening to impact on economies of even those with a robust domestic growth.
Such global developments have affected flow of capital from foreigners who have been largely participating on the domestic bourse.
This has led to a mismatch in the supply and demand of equities as there are more sellers than buyers.
This disequilibrium leads to a decline in prices, as buyers will only be willing to buy the shares at a lower price.
Last month, shares bought by foreign investors, especially in heavyweight stocks dropped from US$20,5 million in August to US$7,34 million.
With only 51 days of trading this year, the market is likely to remain subdued as a result of liquidity constraints.
The indigenisation policy, which compels foreign owned companies to localise at least 51 percent of their shares, will continue affecting the amount of capital flowing into the local market.
Share prices might also remain stagnant as a result of the absence of speculators.
Speculators observe new information, form a fresh sense of risk and return, and discover that the present valuation on the market is out of date. They actually risk their capital in taking positions on the market.
If a speculator thinks that new information justifies a lower valuation, he/she short sells the security, and vice-versa.
These activities serve to feed this new information into market prices, hence, they are the heart of financial markets.
Speculators do price discovery, and without speculators, the price mechanism will be flawed.
An efficient market must exhibit volatility. When news breaks, prices must change.
An efficient market is one where new information is rapidly captured into prices.
The equities market continued trading in the red last week with the industrial index dropping 3,5 percent to 146.91 as compared to the previous week on losses in heavyweight counters.
The mining index also declined 2,52 percent to 138.35 during the same period.
PPC extended losses as it dropped US15c to US235c while Econet and Lafarge lost US5c to settle at US375c and US65c respectively.
M&R retreated US1,50c to close at US13c as Aico and TA were down a US1c each at US21c and US16c respectively.
The losses were partially offset by gains in Fidelity Life, which added US1c to US13.50c.
Astra was up US0,60c at US4,10c and Barclays was US0,50c higher at US7c. Bindura gained US0,40c to US5c and Falgold moved up US0,10c to US7,70c. Hwange and Riozim were unchanged at US52c and US57c.