adminZIMBABWE Stock Exchange (ZSE) listed companies are set to have a difficult time in attracting investment as the industrial index is seen ending the year flat or in the negative territory with most companies likely not to declare dividends, experts have said.
At the beginning of the year, market research analysts had forecast the industrials index to close the year with a 10 percent gain but it has since been revised to flat to negative.
Lynton–Edwards Stockbrokers research analyst Mr Kudzanai Sharara said people invest to get returns but companies have not been performing well, reporting losses and unlikely to pay dividends hence putting downward pressure on share prices.
“It is likely that investors will sell off their stocks and look for better returns elsewhere. The country’s bourse has become one of the only two, out of 18 exchanges in Africa to record losses on its main indices year to date,” said Mr Sharara.
The ZSE’s down 3,96 percent year to date and is joined by Nigeria which is 0,47 percent lower since the beginning of trading this year.
Mr Sharara said the initial 10 percent up projection earlier in the year was premised on certain companies recording better results but this has not been the case resulting in some investors developing negative perceptions.
“Of the 11 (stocks) top picks for the year only four have gained since the start of the year and the other seven are down. The heavyweights of the stock market are likely to close the year negative and this has affected the whole market.
“We expect the market to close the year at five to seven percent rate in the negative based on these losses and this is generally a reflection of the performance of the economy,” he said.
Economist Mr Bongani Ngwenya said it will be surprising to see how possible it will be for listed companies to remain attractive to investors.
Mr Ngwenya said the performance of the stock market is a clear indication of what is happening in the economy.
“When a company records losses it does not necessarily mean that all is not well but if it becomes a trend then the companies begin to lose the confidence of investors. Trading on the ZSE has lost confidence in the eyes of investors and it will become harder to attract investment,” said Mr Ngwenya.
He said reversing the initially projected 10 percent up rate is agreeable as it is necessary for people to accept what is happening on the ground and be realistic on the economic situation.
In a separate interview economist Mr John Robertson said the stock exchange was a good barometer of measuring performance of a country’s economy.
He said there is a clear indication of how all sectors are linked from the agricultural output which affects manufacturing and in turn when manufacturing is low, businesses export less and import more thus making share prices come down.
“When share prices come down, companies cannot pay dividends and this means there are no returns on investment making investors to hold back. This uncertainty is affecting everyone’s conduct and all businesses are on the decline,” said Mr Robertson.
He said it was important for Government to make dramatic changes to stop the decline and there is a need to consider the whole value chain as all sectors are linked and poor performance of one affects the rest causing economic distress in the country.
Online Reporter
Bongani Ndlovu