Market Report WITH FUNGAI NYAUNGWA
The Zimbabwe Stock Exchange (ZSE) rebounded during the week ended September 13 2019, adding back $303 million to total market capitalisation to close at $21.70 billion (+1.42%).
Investors usually flock back to the local bourse anytime there is an expectation that returns from equities will outpace alternatives. The direction the market will take during the week ahead and the foreseeable future will largely be determined by investors’ reading into the 2019 Mid-term monetary policy statement released on Friday.
The introduction of the USD-denominated Savings Bonds as well as the upward review of the Overnight Bank Rate from 50% to 70% (which may result in an upward review in lending rates from the current 35% region) will probably result in an initial sell-off on the ZSE as able investors take advantage of the new developments.
On the other hand, while the recent revelation by the central bank of an inverted yield curve (investors accepting a lower yield on longer dated paper than its short-dated counterpart) was a firm indication that investors expected the economic outlook to stabilize, hence the prospect of lower interest rates in the future.
However, it is also now anticipated that the government will finance its $4.60billion budget deficit to a great extent through the issuance of Treasury Bills, stoking inflationary fears derived from an expected expansion of the monetary base.
While inflation has been rife since October 2018, it has largely been driven by supply side factors, which monetary authorities have been working flat out to address, and it had been hoped that sweeping up of excess liquidity on the market through e.g the reserve ratio and the savings bond, thus contracting money supply would help contain inflationary pressures.
An increase in the monetary base is reminiscent of the previous crisis, and could once again drive back investors to the stock exchange in search of better refuge from capital depreciation.
During the week under review, equity benchmarks largely traded in positive territory: the All Share Index gained 1.65% to 166.75points while the Industrial Index ended the week 1.67% higher at 554.86 points. The Top 10 Index advanced 2.52% to 149.69 points.
The Mining Index shed a marginal 0.07% to 262.50 points on losses in Bindura Nickel Corporation of 0.18%. Year-to-date, the market is up 14.02% as measured by the All Share Index.
Top gains for the week were seen in Old Mutual Limited, up 39.80%, Ariston, up 19.88% and Simbisa Brands, up 13.78%. African Distillers was the biggest loser, easing 11.11% followed by SeedCo Limited, down 6.21%.
Volumes activity was mainly concentrated in African Sun which contributed 49.69% to total volumes, following a block trade of 29,650,100 shares. Total turnover at $38,827,754 was 6.75% lower than the $41,639,924 seen during the previous trading session. Turnover was largely dominated by activity in African Sun (26.42%), Innscor Africa (19.65%) and Delta Corporation (10.76%).
Among the heavyweights, Delta Corporation, Econet Wireless Zimbabwe and Cassava Smartech fell 1.19%, 2.49% and 2.35% respectively. Trading in fungible counters was mixed: Old Mutual edged up 39.80% to close at a new high of $25.0418 on trades worth $3,604,420 while PPC Limited eased 2.38% to $2.0500 on negligible trades worth $42,655.
The Old Mutual Implied Rate closed the week at 17.3258 from 14.6484 the previous week.
Fungai Nyaungwa is an equities analyst.