ZSE remains under selling pressure

Business Reporter
THE Zimbabwe Stock Exchange is set to remain under selling pressure, at least in the short term, but the effect is positive for the money market.
Analysts believe most shares are grossly undervalued and the stock market is the most suitable for long-term investment.
In the short term, the only option available to investors is the money market. Compared regionally, the Zimbabwe money market is rewarding handsomely due to liquidity constraints.
On average, an investor on the money market can earn up to 15 percent return on a short-term investment of 90 days, which is far more than the capital gains being obtained on the ZSE.
In South Africa, government paper is giving a return of about 8 percent and the Libor rates are as low as 0,3 percent for 90 days.
“The stock market makes business sense for patient (long-term) investors because most shares are undervalued,” said Mr Blessing Sakupwanya, the director of the Centre for Economic and Social Policy Analysis.
“It really makes sense to lock your investment in stocks. But for short-term investors, the money market is the only best option available.”
Most listed companies struggled last year, largely due to lack of capital and are likely to break even or make losses in the interim period.
A few blue chip counters are, however, expected to make profits or even declare dividends.
Lack of long-term liquidity in the market has led to less money finding its way on the stock market.
This is coupled with negative investor sentiment, which is basically the opinion of investors about the future performance of the market, mainly due to perceived country risk.
Financial resources flow to the stock market if investors expect the market to meet their targets of capital appreciation and capital preservation.
In a bearish market, however, capital will flow away from the market, as investors fear the market will cause their capital to depreciate.
This has led to a mismatch in the supply and demand of equities as there are more sellers than buyers on the local bourse. This disequilibrium leads to a decline in prices, as buyers will only be willing to purchase the shares at a lower price.