Low returns characterise ZSE

with most of the returns on the edge of the “equities inner city”.
There may be a considerable difference of opinion on the reasons for the ever-wilting returns on the market but the fundamentals’ secret is to continue disappointing the investors notably those with short to medium term view.

It has to be a public warning that the trend would get worse before it gets better.
The moribund mood that follows every policy pronouncements has created a dumb sense in the market, the trend is pointing to factors beyond liquidity and the indigenisation policy as some counters without any iota of risk to that effect continues stuttering.
The anaemic confidence currently defining the financial service sector has not only slowed the equities revival, the money market is in kinetic mood but can virtually struggle to take off and the property market remains a preserve of the bourgeoisie.

The macro-economic climate, however, remains a limited zone to inject life into veins of the nation.
The industrial index opened the week at 192,53 points shedding 7,53 points, the mining sector which used to out-rival the industrials is limping at 130,46 after gaining 0,01 points.
As far as a wish list of new listings is concerned, the year is bound to close without any newcomer to that effect.

There are quality companies in the economy which do not seem to be visitors to the local bourse any time soon, this could be a strategy or a way of needing space to breadth without being answerable to the public or shareholders for that matter.
About 42 percent of listed counters remains a threat to the overall recovery of the whole bourse due to either their ill preparedness to pick the pieces following years of rampant disregard of corporate governance or failure to come up with turn- around strategies for their revival.

The ZSE is a heavily discounted regional market with a potential to break the US$4,5 billion mark in terms of market capitalisation before year-end.
There is a sleeping array of counters trading at below their net book value whilst they belong to a growing economic sector according to regional ratings.
After opening up to an ever-increasing flow of clientele, Edgars shops must be signalling a different story. Management at the company are satisfied with their credit policy as it seems to have raised their turnover by more than 4 000 percent since the switch to dollarisation.

But the share price of the clothing chain shed 15,09 percent within the October month from a price of 10,6 cents to 9 cents at the end of the same month.
In spite of the sprouting of new, uncelebrated shopping models in the market, Edgars remains a force to reckon with in terms of market share but a non-entity when it comes to shareholder value.
The launch of Eco-Cash coupled with the ever rising subscriber base for Zimbabwe’s leading telecomm giant tells a tail story of market movement.

They had a basic earnings per share of 0,66c as to end of 2010 and a balance sheet size close to US$400 million.
Econet has a healthy cash flow of US$14 million among other positives for the counter, a 7,23 percent decline in the share price performance for the largest taxpayer to the Government remains an uninspiring story for the self-styled company.

Fast foods giant Innscor continues with a slow pace as their share price dwindled by 12,90 percent to open the new month of November at 54 cents.
Their strategic relationship with the recently capitalised Irvines Chicken, Colcom and Natfoods should have been digested.
When the fast food industry is portraying itself as a defensive industry with low risk notably in this illiquid market, a gloomy share trend could be testimony that the market does not necessarily respond to fundamentals but expectations and confidence levels.

It is very few investors at ZSE who are willing to accept obvious risk, as the political environment remains worrisome and fragile.
The active participation of foreigners is bound to significantly change the direction of the market more than any domestic bargain no-matter how special the deal is classified.
A collusion of few voices at the local bourse that continues setting prices through stranglehold of information on occasional deals has to be rooted.

The Securities and Exchange Commission continues partaking as a competitor to the ZSE instead of policing the ill-gotten behaviour of market participants, this impacts on investor confidence which had seen depressed prices being the order of the day.

The year ended March 31 2011 was so convincing for Delta, its revenue increased by 45 percent to US$408 million with an EBITDA growing by 67 percent to US$81,7 million and earnings per share of 4,50 cents after a 42 percent increase.

This does not augur well with the lacklustre performance of the biggest counter in Zimbabwe by both market capitalisation and balance sheet size if an objective valuation method is to be employed.
The blue chip counter opened the week of November at 71,02 cents after closing at 72 cents for the month of October, a 1,36 percent decline.
There was a marked increase in capacity utilisation for the beverages giant which also saw them implementing effective cost containment measures and a product mix that favours the higher margin product lines.

A conservative dividend payout policy was adopted to allow for investment in capital expenditure.
CBZ Bank continues with its shadow performance on the equities front as its share price continues thriving on a support-resistance range of 12 cents and 14 cents. The counter is certainly heavily discounted if all fundamentals are to be factored in.

With an asset base at to last financial year-end of US$686,9 million, deposits of US$578,3 million, 58 branches and the significant market capitalisation, the odds seems stacked against the banking group.

This could be attributed to the dominance of the “domestic flavour” on its corporate brand, a questionable loan book which has potential for default and the strong association with Government and Treasury funds which could mainly be due to non active participation of the central bank.

The low rise trend of its share price is bound to overspill into the next year as looming elections will be a safe haven for a wait and see attitude by potential investors.
The world over, a call for a referendum by Greek Premier George Papendrou has sent shivers into the Eurozone despite unanimity among Greek legislators to go the rout of a bail-out referendum.

This has seen most of the world financial markets slipping and the upcoming G20 summit is expected to be the D-day as all eyes will be on China which is the only candidate with presumed appetite for the Greek debt.

The Asian giant had been funding the unrivalled spending patterns of the west.
It is argued that if the world was to spend at the same rate the US does, only 1,4 billion people will be supported by the available resource in the world, which makes the Obama administration a symbol of profligacy.

The outlook for the last two months of 2011 remains gloomy as no significant shift is expected in terms of the equities market performance.
The forthcoming budget might be a message to the populace to continue tightening the already tightened belts, the fiscal space remains limited and public finance management continues threatening the possibility of economic recovery.

The inconsistency in tax policy by the Government authorities remains unimpressive as the Treasury continues altering tax rates with each coming budget. Reboot the economy and the equities will respond.