adminWhile some of us are catching a cold, the Zimbabwe Stock Exchange is far from catching a cold, it is actually warming up thanks to market gyrations that have been favouring the bourse regardless of a heavily discounted share price regime which has potential to tweak.
The Zimbabwean investment community has been pleasantly surprised by the improvement in share performance, which has surpassed the expectations of even the traders themselves.
Indeed, it is the same market which opened the year valued at slightly above US$3 billion, went down slightly in March due to lukewarm full year financials, before picking up again to the current value of US$5,7 billion.
The top gainers for the mid-month period of May include Meikles which gained 15 percent to close last week at US25,10 cents, the property concern Pearl Properties rose 16,07 percent to end at US3,25 cents, OK Zimbabwe was up 19,7 percent to close at US28,01 cents, Truworths gained 25 percent to end the week at US5 cents with Phoenix becoming the biggest mover gaining 66,67 percent to close the week at US0,50 cents.
Interestingly, the bottom shakers shed a smaller percentage compared to a corresponding rise in the movers.
This might also help to explain the impressive run the local market is experiencing with the haggling by politicians on election dates not deterring the foreign component of portfolio investors from trying their luck on the local bourse.
This follows the freezing of options in the transatlantic zone due to stuttering Western economies.
Last week, Interfresh shed 25 percent to US0,15 cents, CFI lost 16,67 percent to US0,05 cents, NMB failed to impress its affluent clientele after its share tumbled by 10 percent on US0,09 cents, FBCH’s convincing financials for 2013 certainly disappointed as they failed to psyche the counter which shed 6,25 percent to end the week at US7,50 cents.
Telecommunication giant Econet’s move into banking has restricted the counter dismally to way below its glass ceiling barrier of US100 cents as it ended last week at US71,02 cents after shedding 1,36 percent.
The common denominator for most of the listed counters is the fact that they all remain heavily undervalued.
The peaking of ZSE’s performance could be attributed to a host of issues which include the cyclical argument, the disproportional sensitivity of the bourse, improved market sentiment or the never ending political differences between the two major political parties in the land.
It can be argued that the ZSE has bottomed out with most stocks perched at below 1 cent and the only trajectory was to recover from the penniless value, which explains the cyclical debate.
Therefore, the exchange is adjusting to normal price path considering that the counters which are heavily discounted are not necessarily “shells”.
Apex, Greenbelt, Willdale, Trust, MedTech and PGI are some of the perennial underperformers with share prices way below 1 cent, but the fundamentals for these counters are not necessarily weaker.
This buttress the assertion that the intrinsic value for such counters is way below what is prevailing in the market.
It is that recovery for some selected counters, which has raised the local bourse’s market capitalisation.
The ZSE had also become so sensitive to portfolio inflows regardless of how insignificant they are at regional level.
A single foreign investor with US$2 million can shift the direction of the market, which is not possible in other regional exchanges, Botswana included.
This is a symptom of an illiquid economy, such an argument, however, can expose the unsustainable nature of the positive rally on ZSE since the drivers of the movement are ephemeral investors who will shift their portfolios once fundamentals in their home countries stabilises.
This could also be a sign of improved market sentiment, which is prevalent in the Zimbabwean economy.
The upcoming United Nations World Tourism Organisation General Assembly and other international events, which will be held in the country acting as a drawcard for foreign investors.
The good news could be that bad news sometimes is heavily discounted and those investors exposed to such adverse news do not certainly rely on hearsay in their decision making.
The fact that coalition governments can be a springboard for stable governments as demonstrated in Kenya could reinforce the positive belief by investors that an election is not tantamount to turning a wrong corner after all.
Politics normally has a destabilising effect on the ZSE, however, it appears that both local and foreign investors are developing a thick skin and are not buying into Western machinations to portray Zimbabwe as a political unstable country.
The traditional adage where it is worthy a trial when the market is down seems to be holding water and ZSE is no exception in harvesting the glad tidings.
Thank you and God bless you.
Christopher Takunda Mugaga is an economist. He is the Head of Research for Econometer Global Capital, a regional finance and economics research firm. He can be contacted on +263 772 340 353/+263 776 266 062 or: [email protected].
Online Reporter