THE equities market continued to lose ground this week causing more pain to stock market investors who have seen their investments shrink rapidly in the last few weeks. Biggest losers were in the properties sector which lost 14,42% after a 1,45% gain the previous week.
This was as a result of a 28,57% loss by Pearl and Mash Holdings which eased 27,78% this week. The other property counters on the local bourse Dawn and Willdale experienced mixed trading during the period under review. Other counters that are linked to property are Murray & Roberts, Pretoria Portland Cement Company and Larfarge.
While a growing number of pundits have all but declared the property market healed, the latest evidence on the stock market and distortions in housing prices paint a different picture.
The downward correction in property prices since dollarisation has in fact enhanced affordability, making it possible for more buyers to participate in the market.
The reduction in costs is not the only aspect contributing to a buyers’ market; the increased availability of homes for sale is also giving homebuyers further options.
The mining sector was second worst loser, shedding 10,68% following a 7,61% loss in the previous week. The major contributor to this loss was RioZim which retreated 16,67%.
Market analysts said as long as liquidity does not improve, the market was likely to remain generally subdued during the remainder of the year.
Developments such as the introduction of Special Money Market bills with tenors of 90 days, 180 days and 365 days could further dampen the equities market. Â
Rates for these bills would be market-determined. Â
The stock market has been subdued for the last six weeks and the resuscitation of the money market is likely to further weaken the stock market as some of the much-needed liquidity would find its way into the money market.
The stock market is expected to be depressed in the short to medium term as it cleans itself of speculators, who finally have a market they understand better, leaving the stock market to institutional investors, pension funds and other long-term investors. Â
However, in the long term the stock market is a “buy” as it has potential to go higher as capacity utilisation increases. Â
Since the beginning of the year, capacity utilisation has gone up to about 30% from a low of 10% with some few companies like Delta reportedly working at capacity of over 50%. In the hotel sector, for example, occupancy levels are as low as 30%. Thus equity market loyalists should take advantage of this weakness in prices to take positions on the market.Â As the economy improves, the prices would move to reflect developments on the ground. Selective picking and good strategies would be required at this particular time.