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Roberta Katunga, Senior Business Reporter
THE equities markets appear to have bottomed out after hovering around the 100 point mark in the past three weeks with analysts predicting a slow recovery in the medium term as foreign participation improves.
According to Investopedia, if a stock has bottomed out, it means it might have reached its low point and could be in the early stages of an upward trend.
Investors usually see a bottom as an opportunity to purchase securities when they are potentially underpriced.
In an interview, Lynton-Edwards Stockbrokers research analyst Mr Kudzanai Sharara said shares on the local bourse have reached the lowest level they can get to and that the counter is now undervalued.
He said the market was now trading on the 2009 level and there was no reason why prices should go down from this level.
“The performance of companies is now against prices that they are trading at hence the price is too low for this kind of performance thus presenting a buying opportunity for investors,” said Mr Sharara.
In the week ending 26 February, turnover was $1,1 million while the week ending 4 March it was at $1,4 million and week ending 11 March it further improved to $5,3 million.
Mr Sharara said the improvement in turnover was evident judging by the amount of investment coming into the market.
“Investors are coming back into the market because shares are undervalued and foreign participation has improved this past week because of the bargains available.
The recent results by listed stocks also showed an improvement in profitability and revenue for companies like Innscor, CBZ and Barclays were up compared to prior years when revenue was coming down,” he said.
He said company fundamentals had stabilised and were now recovering signaling an upturn in fortunes adding that in essence there was no justification for share prices to continue going down.
In a separate interview economist Mr Kipson Gundani said it wasn’t quite obvious that the market had bottomed out as the ZSE is characterised by its reaction to news.
“Speculation drives the stock market. In recent weeks, the market reached its lowest point since dollarisation and naturally an upward trend is expected from there. Prices might be low now but demand will stimulate a rise in the price of shares.
The ZSE is sensitive to news with the most common being negative news that leads to a bullish mode. If the news remains negative, counters will continue underperforming,” said Mr Gundani.
He said in order for the market to improve; it was imperative to address the fundamentals affecting the economy and without doing so fluctuations in the market would continue.
Bongani Ndlovu