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What a bountiful third quarter for ZSE investors

By Admire Mavolwane



Since the light rains, which as the Meteorological Department cautioned is not a signal that the rainy season is now upon us, there has hardly ever b

een so much running around in the capital with many a farmer organisation representative urging members to start preparing their fields for maize, soya beans and tobacco crops.


As usual there were shrill calls for government to provide, or at least make sure that all the necessary inputs are available. GMB on its part reassured stakeholders that, in line with its national mandate, all its depots’ personnel are psyched up and ready to distribute the inputs once they are to hand.


Following the rollover of the $19,5 billion Aspef funds announced during the mid-year monetary policy review more good news awaited the farmers. The Minister of Agriculture reminded wheat farmers that their obligations to the state in terms of funding advanced do not fall due this season, but only after the next. In the meantime, they should use their bumper $217 913,40/tonne producer price to prepare for the next summer farming season.


Hopefully, all the incentives and goodwill provided farmers will be repaid in the form of grain self sufficiency for the nation and increased tobacco output.


It was not only the wheat farmers — and tobacco growers after they received their back pay -— who could be seen sporting broad smiles, as stock market investors also had every reason to be smug.


The quarter opened with a lot of promise for share punters as July recorded gains of 76,85% with investors taking positions ahead of the June reporting period as well as betting against both the half year fiscal, and monetary policy statements. Investors who had the nerve to buy ahead of the monetary policy statement reaped the rewards for having the courage of their convictions. Even those who were somehow late to the party and bought after the monetary policy review statement which was delivered on July 31 have also done well.


The governor, in his half year review, not only changed the currency by introducing a new family of bearer cheques without three zeros, but also re-affirmed the adoption by the central bank of a low interest rate policy. The overnight accommodation rate was reduced from 850% to 300% for secured lending. Subsequently the 91-day treasury bill yield was reduced from 525% to 200%, before the issuance of this short dated paper was suspended in favour of six months and one year treasury bills. The yields on these sovereign assets also came off significantly to 100% and 150%, respectively. A single tender for 91-day treasury bills was held mid-September, probably for purposes of realigning the yield curve at which the yield came out at 66,33% per annum.


The quarter also saw an unparalleled amount, of $126,3 billion in treasury bill maturities. This injected so much liquidity into the market that banking institutions were turning away short term deposits, by either not paying or by quoting interest rates around 10% per annum.


Even for the relatively longer deposits of over 30 days investment interest rates were very discouraging. With the money market having been removed from the list of investment options focus turned on the stock market; motor vehicles and real estate.


The stock market whose gains are easily quantifiable returned 87,53% in August and 114,06% for September, bringing the overall gains for the quarter to 608,30%. All the counters currently trading on the Zimbabwe Stock Exchange recorded uplifts of more than 150%. Those investors who had the good fortune of having taken the wise counsel of probably one or two analysts in the market and bought into First Mutual, Bindura and Falgold, owe their investment advisor a thank-you card.


All the above counters have some kind of story behind the share price movement, in some instances not justifiably correlated to fundamentals.


At the other end, investors were giving Gulliver, Edgars, and Tedco a wide berth and thus the trio returned the least amount of capital appreciation. It is probable that the quantum of the differential in returns between First Mutual and Gulliver — 4 344,4% vs 181,3% — were Zimbabwe a litigious society, would have resulted in a number of lawsuits in the investment industry.


In our quest to find out why analysts almost invariably fail to pick winners, we stumbled upon a piece in The Spectator written by a Merryn Somerset-Webb, which although focusing on unit trust returns would apply to the entire investment management/advisory industry. The writer says:


“It was a massive failure in forecasting but, I am sorry to say, far from an unusual one: fund managers are, in general, hopeless macroeconomic forecasters — and even worse at predicting the direction of the stock market in order to make money for their investors.


“Why? Simple. They tend to base their market views and their stock-picking on their economic (earnings) forecasts — predicting the unpredictable by looking at the probably wrong.”

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