The Zimbabwe Stock Exchange (ZSE) performance is expected to be depressed as investors are of the opinion that policy makers are focusing more on politics at the expense of the economy, local analysts have said.
BY VICTORIA MTOMBA
During the third quarter of this year the mainstream index added 4,65% to close at 195,25 points due to the positive momentum in Econet, National Foods, SeedCo and British American Tobacco. But analysts warned that the gains would be reversed if policy makers devoted their focus on politics.
“The ongoing political developments in the ruling party will likely put a damper on the market as some investors are of the opinion that policy makers will likely concentrate on electioneering at the expense of nurturing the economy,” an analyst said.
The ruling Zanu PF is drowned in factionalism as leaders position themselves ahead of the watershed congress in December.
First Lady Grace Mugabe’s “Thank You rallies” across the country have proved to be a distraction as government business has been relegated to the back burner by ministers and officials jostling to please her.
Mugabe has been holding rallies for the past two weeks to thank women following her nomination to the Zanu PF’s decision-making body, politburo.
While politicians jostle for positions, the economy has been the biggest casualty with statistics from the Confederation of Zimbabwe Industries (CZI) showing that capacity utilisation levels for industries has gone down to 36,3% from 39,6% during the same period last year.
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An industry’s level of capacity utilisation determines how much fixed costs should be allocated per production unit and as it increases, the fixed costs (and therefore also, total costs) per unit decrease.
The CZI report showed that shortages of water, electricity, and working capital were still with the sector since 2009.
Total market capitalisation closed the third quarter at US$5,14 billion compared to US$5,16 billion in 2013.
“The earnings reporting season is underway and the majority of companies continue to post disappointing numbers. Slowing down revenue growth rates and deteriorating profitability trends remain the major headlines.
“Trading on the ZSE will likely remain generally depressed for the greater part of this quarter. We however expect some trading spikes in some cases as foreigners continue to be key participants on the local bourse,” the analyst said.
