THE stock market was this week bearish as investors moved hot funds into the money market after rates began firming on the back of a hike in the central bank’s accommodation rate last week.
P align=justify>But analysts said the stock market, whose indices broke records since rates plummeted in July after drastic cuts by the central bank, was likely to rebound because of sub-inflation rates.
Metropolitan group economist, Brain Muchemwa told businessdigest that investors would flock to the money market but bounce back after realising that the fundamentals driving the market had not changed.
“Once reality starts to dawn, the punters jamming the exit door on the stock market will start knocking back cautiously on the same door, and the market will begin to creep up once again,” Muchemwa said.
But economic commentator, Eric Bloch, said even institutional investors were re-aligning their portfolios following the central bank’s new measures.
“Volumes on the stock market would be depressed as most institutional investors who drive the market shift to the money market were there are higher returns,” Bloch said.
Muchemwa said with the Reserve Bank using long paper to restructure domestic debt, market interest rates were unlikely to dampen the stock market in a significant way.
“Our stock market is very sensitive to interest rates and speculators are now jamming the exit door. The problem with short-term market punters is that they hardly define their threshold appetite for wealth accumulation on the stock market,” Muchemwa said.
Muchemwa applauded recent measures by the central bank demanding to know the identity of all stock market investors, including those investing through nominee firms.
Muchemwa said: “Investors who were using the (stock) market to clean dirty money could be the ones who might find comfort on the money market as revealing their identities might work against them.”
Bloch however said divulging investors’ identities to the Reserve Bank was not going to trigger any significant changes on the equities market.
“Genuine investors would not mind if their identity is revealed. Only those with sinister motives would be afraid,” said Bloch.
Bloch hinted that the fundamentals driving the stock market had not changed and a rebound of a bulls market was imminent.
Zimbabwe Allied Banking Group economist, David Mupamhadzi, said the equities market was likely to slow down because of an expected mass exit from the stock market.
“The outlook to December would not be characterised by much activity as had been the case since the beginning of the year,” Mupamhadzi said.
“Because it would be a sellers’ market, this would dampen prices, presenting an opportunity for long-term investors and fund managers to review their portfolios. Stocks had been overvalued since the beginning of year,” said Mupamhadzi.
Zimbabwe Financial Holding (Finhold) group economist Best Doroh predicted significant movement of investors from the stock market to the money market where returns were presently high.
However, such movement was likely to be temporary, Doroh said.
“There would be a shift of investors from the stock market to the money market where returns would be high in the short-term. There would not be much activity on the stock market as institutional investors who drive the (equities) would have flocked to the money market,” Doroh told businessdigest.
Independent economist John Robertson said the decision by the Reserve Bank would change trading conditions on the stock market.
“It seems government is now competing for money on the stock market. It shows massive levels of interference in personal decisions,” Robertson said.