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THE Zimbabwe Stock Exchange last week plunged to its lowest point in six years.
But the drop belies the resilience of three blue-chip stocks – BAT, National Foods and SeedCo – that have significantly bucked the downtrend over the past year.
On Tuesday, the mainstream industrial index fell below the psychological 100 points low mark for the first time since April 2009 to close at 99,82.
The mining index remained flat at 19 points.
Both the industrial and mining indices were rebased to 100 points in February 2009 after the country transitioned from the Zimbabwe-dollar era to the multi-currency system in order to contain hyperinflation.
After peaking to 233 points in August 2013, the industrial index has since nosedived on investor concern on economic growth, political uncertainty and falling company profits.
The index has crashed 40 percent in the past 52 weeks and has declined 13 percent since the beginning of the year.
Heavy-weight counters such as Delta Corporation, Econet Wireless Zimbabwe, Innscor Africa Ltd, Hippo Valley Ltd, and OK Zimbabwe – the country’s biggest firms in beverages, telecommunications, fast foods, sugar, and retail respectively – have been trading in the red.
Trading on the bourse has largely been turbulent with investors losing more than US$1,67 billion since February 19, 2015.
Market watchers say counters that have been resistant have been able to demonstrate financial soundness, product diversity and a consistent dividend policy.
Shares of BAT Ltd, Zimbabwe’s biggest cigarette maker, have climbed five percent to US$11,75 in the past year, though year-to-date the stock has eased by a similar margin. BAT Ltd reported in its year-end financials released Thursday that net profit rose to US$15,5 million from US$13,5 million a year earlier as revenues jumped to US$45,3 million from US$45 million.
Analysts had forecast net income would rise 21 percent to US$15,8 million.
The tobacco processor declared a final dividend of USc44 per share.
“BAT Ltd has shown defensive qualities amidst a challenging economic environment and has a favourable dividend policy and return on equity,” said stockbrokers IH Securities in their 2016 Zimbabwe Equity Strategy report.
While economists opine that the targeted 2,7 percent growth this year might not be achieved, investors have been propping up agriculture linked stocks SeedCo and National Foods.
Seed Co has remained unchanged since January this year, narrowing by just over one percent to US82c while National Foods has slowed 0,63 percent to US$2,60 in a bear market. The numbers compare with year-to-date declines in other heavyweights of between 26 percent and 37 percent.
Econet Wireless Zimbabwe, surprisingly, has added four percent since 2016 opening but the share has tumbled 64 percent in the past 12 months. Analysts have guided Seed Co Ltd full-year 2015 revenue to fall 4 percent to US$90 million, and National Foods Ltd’s to rise 2 percent to US$320 million for full-year 2016.
But prices and demand will likely remain strong even with the likelihood of reduced margins, they say.
“Whilst the 2013/14 agricultural season posted a strong performance, the outlook for the 2015/16 agricultural season is weak. . .We believe that this bodes well for National Foods Ltd that has already secured a well-priced pipeline of grain,” IH Securities said.
Zimbabwe National Chamber of Commerce CEO Mr Takunda Mugaga said stocks that had resisted the ZSE rout had been supported by the inelastic demand of their products. For instance, BAT’s cigarettes, National Foods’ mealie-meal, and SeedCo’s seeds will always be in demand regardless of economic circumstances, he said.
The companies have been consistently paying dividends to shareholders.
“The majority of investors on the local bourse are foreigners, they want guarantees their investment will be safe in the face of political uncertainty. It is important also not to underestimate transparency issues.
“There are no shady deals in these companies. With other companies, you can never quite understand their business models or accounts as they are shrouded in secrecy,” said Mr Mugaga.
There are also stocks such as Fidelity Life Assurance Ltd, Old Mutual Ltd, CBZ Holdings Ltd, FBC Holdings Ltd, NMB Zimbabwe Ltd and Barclays Bank Zimbabwe that have been showing resistance.
Bearish conditions on the stock market are expected to continue until year. The declines are not peculiar to the local market.
Stock markets in South Africa, Kenya and Nigeria have sharply declined in the past two years on weaknesses in the global economy.
Online Reporter