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Stock market wary of 2004 budget

Eric Chiriga

THE stock market has plunged into a recession as investors hold aloof in anticipation of the forthcoming 2004 national budget.



s-serif”>”The stock market is in a recession because investors have moved out of the market. They are waiting to see what will be contained in the national budget,” said Trust Holdings Ltd chief economist David Mupamhadzi.

Investors are sitting on the fence because the budget will have a serious impact on their investment decisions.


Government postponed the date of the presentation of the budget from October 23 to November 20.


Analysts anticipate that the budget will run into trillions of dollars because the economy is going through a serious hyperinflationary phase.

Inflation has reached a record 455,6% and is expected to hit 1 000% by the end of the year.


Of late, investors ceased investing in shares and began investing in property.


Due to inflation, investing in shares does not guarantee a return.


Analysts say share prices tend to lag behind the rate of inflation and the stock market is now highly-volatile.

“A lot of investors are losing out on the stock market,” Mupamhadzi said.


He said considering the economic climate in Zimbabwe, it was critical for investors to choose investments whose rate of appreciation in value beat the inflation rate.


He said it appeared the only investment which creates a hedge against inflation is property.


The property market in the country is growing and the value of property beats the rate of inflation.


Recently, estate agents asked government to allow the pegging of property prices in foreign currency to hedge landlords against inflation.


The British pound and the US dollar are officially pegged at £1:$1 300 and US$1:$824 respectively. But on the parallel market the pound is trading at £1:$9 000 and US$1:$6 000.


Pegging of property prices in foreign currency is preferred because the prices will be stable and will represent the real market value.


Mupamhadzi said the property market in Zimbabwe was not heading for a bubble.


“The property market in Zimbabwe is not heading for a bubble. It appears prices will continue fluctuating until the economy is back to normal,” he said.


A bubble is a situation when if prices are not sustainable they begin correcting themselves.

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