ZSE catches a cold

any projections inasfar as the local bourse is concerned.
That old Spanish stereotype of putting things off until manana seems to apply so much in Zimbabwe.
For nearly a decade, bankers have been talking about the need to restructure an unimpressive financial system, particularly now when there are reports that there are seven banking institutions that have failed to meet the RBZ capital requirements.
This roughly equates to about a quarter of the locally owned banks and the defeaning silence by members of the august House on whether or not to draft laws to reshape the sector is so sickening. There might be deep-seated misconception on whether such politicians can have a say in shaping the financial services sector. Yes, they are indispensable.
The week opened in a panic mood across Europe with France and German bourses shedding more than 1 percent following the deepening Greek crisis.
A US$30 billion loan funding shortfall is no mean figure and this is leaving the whole of the eurozone in a quandary as witnessed by serious digestion of market news by the international markets save for our own ever decoupled Zimbabwe Stock Exchange.
The ZSE at times is capable of ignoring decisions which are made just 100 metres from its base. Ironically, this is also the distance between 101 Union Avenue and Parliament building.
Greece’s denial of another aid package smacks of nothing but national pride and this might be mistimed as the austerity measures they embraced following the emergence of the crisis brought no real growth.
The European nation’s rating levels plummeted with Standard & Poor cutting the ratting from B to BB.
Greece’s default swaps soared to a record high with its overall credit rating one notch above that of the unstable Pakistan.
This week trading on the ZSE opened on an usual trajectory with the industrial index opening 2,25 points lower from the last closing price to 161,61 points while the resource index or the mining index opened -6,69 at 196,74 points.
The market lacks direction and this unending cycle of mediocrity ought to be with us as we expect to go beyond the winter season.
The Pareto rule of 80 percent to 20 percent status is virtually unsustainable and the P/E ratios for different counters do not seem to tell a story.
Econet opened the week at 500 cents, Commercial Bank of Zimbabwe at 18 cents, Afre at 3,5 cents, Colcom at 42 cents, TN below a cent, RioZim at 140 cents and Innscor at 58 cents.
The current stand-off involving Messrs Jayesh Shah and Patterson Timba is just but a mirror image of how expensive security money in the market is.
The big players such as Econet Wireless Capital Holdings holding an average of 42 798 497 shares which translates to about 19,74 percent are well placed to increase their stake in the equities market in general and in Afre particularly.
That is a threat of a Pareto state of affairs on the ZSE as an average of 12 counters contribute up to an average of 68 percent of market capitalisation. The submission of indigenisation plans from Zimplats and Anglo-Gold continues sending shivers as the news was received negatively on the financial market.
With the once anointed “deal makers” in the mould of Patterson Timba failing to honour a debt of US$12 million, who will snatch the stake of celebrated mining conglomerates like Zimplats?
Government needs to guard against stake grabbing by cashless but ambitious investors.
As I have mentioned before, the lawmakers are expected to contribute positively without applying a one size fit all policy, which has proven to be untenable going forward.
A lot of arguments had been peddled in the market with the impact of the liquidity crunch on stock market performance being exaggerated.
A lot of counters continue acting as a breeding ground for an unending cycle of depressed returns.
Some of the contributing factors are to do with corporate governance issues where an average of 20 listed counters are still managed from controlling shareholder briefcases with analyst briefings acting as a window to appear open.
Some of these stakeholders cannot erode the agency problem and they tend to hold onto information, which is openly fundamental to analysts’ day duties.
Our in-house research team for the local market classifies companies on an index based on their willingness to open up on both shareholders and analysts.
This we do because it’s our strong belief that information asymmetry had equally contributed to a negative trajectory the equities market has been pursuing.
Among the managing boards not willing to open up according to our basis are Dairibord Zimbabwe, Econet, Afre Corporation and of late Dawn Properties.
Four years ago, Celsys chief executive Mr Geoff Goss was accusing analysts of lacking thirst for knowledge. His argument was since he got into office into 2005, no single financial analyst had approached him to find out what Celsys had been trying to achieve.
His conclusion was personal grudges too often form professional opinion which he described as a disservice to the investing public.
When Lonrho Plc announced its acquisition of a controlling interest in Celsys, Mr Goss was infuriated when we chose to ask about structure issues during an analyst briefing.
He viewed our inquiry as a deliberate ploy to tarnish the positive response his stock attracted after the deal.
We strongly believe it is sunshine at ZSE which is desperately sought after as the winter season has just begun.
The equities market is simply a one-eyed man among the blind, the non-activity of the money market save for the bankers acceptance which is a common paper and the property market which is certainly out of reach for many investors.
The absence of an active money market in the long run is proving to be an alpha to stock market growth as investors normally prefer a wide portfolio.
In the short run it appears as if the absence of a rival investment market will increase real demand for the solo market.
Investors will practise apathy as the term widens since attractive returns are a function of comparison. This is, however, open to debate.
Thank you and God bless.
l Christopher Takunda Mugaga
Head of Research
Econometer Global Capital
[email protected]
+263 772 340 353, +263 776 266 062