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Other things being (un)equal

IS anyone sure of what the situation in the country will be in two months’ time? This question does not necessarily need a response but only captures the level of uncertainty surrounding us.

The starting point of several economic and finance models is the assumption that other key variables will hold constant in keeping with the Latin dictum of ceteris paribus.
In English this expression is translated as “other things being equal or holding constant”.  When using ceteris paribus in economics, it is assumed that all other key variables except those under immediate consideration will hold constant as any change in any one of these other important factors would invalidate the conclusions reached.
While this is too simplistic it is the idea of stability in economic factors which makes forecasting and modelling possible. It is easier to assume ceteris paribus when variables are more predictable and stable. The concept is ineffectual in highly volatile environments such as Zimbabwe is in presently. Nothing remains constant long enough in Zimbabwe for people to make sense out of it.
A case in point is the political events that unfolded towards the end of October which forced the stock market into a tailspin. Building on the impetus which started at the end of September, both the mining and industrial indices were in full throttle in the first three weeks of the month notching up 9,6% and 8,8 %, respectively. The market cap that closed September at US$3,97 billion peaked at US$4,35 billion on the 22nd of the same month.
When the MDC-T announced its disengagement from Zanu PF on October 16, a week later the market started reversing the gains it had accumulated in previous weeks. By the fourth week both the industrial and mining indices had lost 14,0% and 22,2%, respectively. The cumulative loss for the month was 5,7% and 15,4 % for both the mining and industrial indices in that order. The market cap shed US$559 million, a huge figure in so short a space of time, to close the month at US$3,79 billion.
The absence of foreign investors due to the heightened political risk caused the bloodshed. Local investors have always been net sellers since the adoption of multiple currencies early this year and foreign money has been absorbing the sales.
Daily turnover reduced from an average of US$3 million a day to just under US$1 million, signifying that most of the money traded on the ZSE is from foreigners.
Global markets on the other hand were also in the red owing to negative economic data in the US and Britain.
Filings for unemployment benefits continued to rise on a weekly basis in the US and home sales continued to decline.  The Dow Jones was listless even though it managed to trade above the 10 000 mark, its highest level in 2009. The NASDAQ lost 3,6%. Jitters were also felt in the Asian markets with the Nikkei 225 easing 1%. The FTSE 100 lost 1,7% owing to negative GDP statistics from the British Economy. Third quarter GDP fell by 0,4%.
Closer to home, the JSE was buoyant owing to the surging gold price on the commodities market. The gold price which had opened the month at US$1004/oz peaked at US$1062/oz resulting from renewed interest due to a weak dollar.
The top performers on the ZSE for the month were ABCH, Zimpapers, Radar, Edgars and AFDIS, gaining between 57,1% and 100%. These counters have nothing in common except that they had lagged behind the market for a long time.
The bottom performers, with losses ranging from 37,5% to 47%, were Hwange, TA Holdings, Truworth, Celsys and Zeco.
TA’s loss followed reports of the closure of Sable Chemicals due to unviable electricity tariffs. Zeco reported a loss of US$589 711 in the six months to June this year and very few investors were interested in the counter.
Boardroom squabbles from KMAL eventually came to an end after Nigel Chanakira and John Moxon finally agreed on a truce. That agreement paved the way for the lifting of the specification of KMAL with TM Supermarkets having already been de-specified. This is a positive development which if swiftly concluded may reassure restless investors. 
Another positive, from the view point of equities’ investors, was the re-engagement of major parties in the Inclusive Government after the Sadc Troika meeting. The market is buoyant once more and if ceteris paribus the momentum carries on, November could be a better month for investors. But, as noted, in Zimbabwe nothing stays constant for long.

Comparison of the ZSE with key global markets


By Evonia Muzondo and Ranga Makwata

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