Blue chip stocks drag down ZSE
PHILLIMON MHLANGA
Blue-chip stocks have lost the most market value in the past two weeks, dragging down the Zimbabwe Stock Exchange (ZSE) into a crisis, Business Times can report.
The local bourse’s losing streak continued in the period under review resulting in the market capitalisation drop to ZWL$1.971 trillion on Tuesday this week from ZWL$2.3 trillion two weeks ago.
Apparently, investors, especially foreigners, dumped local equities amounting to ZWL$4.09bn this week, according to official data collected from the ZSE.
A significant number of Zimbabwe’s most valued companies listed on the ZSE lost billions in market value in the period under review.
All Share Index lost 177.39 points in the past two weeks to close at 16 040.97 points.
The largest loss among the blue-chip shakers was in the country’s leading cement maker, Lafarge Zimbabwe, which dropped ZWL$21.05 to close at ZWL$122.00, while Zimbabwe’s biggest brewer shed ZWL$10.19 to close at ZWL$269.60.
Other losses were recorded in the conglomerate, Innscor Africa Limited, whose trading value lost ZWL$6.42 to end at ZWL$313.53. Zimbabwe’s largest retailer, OK Zimbabwe eased ZWL$1.03 to close at ZWL$28.02 while EcoCash Holdings shed ZWL$6.80 to close at ZWL$51.48.
However, the movers were led by AXIA Corporation which gained ZWL$8.62 to close at ZWL$80.00.
CBZ Holdings traded ZWL$2 higher at ZWL$234.00 while African Sun Limited gained ZWL$1.95 to close at ZWL$14.95.
Investment analysts say the slump is due to government interventions, currency challenges, and liquidity constraints, among many other problems.
“Following government interventions aimed at curbing speculative activities on the stock market in response to surging inflation, the local bourse’s performance was subdued.
The ZSE weaknesses will persist in the short to medium term. Foreigners continue to be net sellers.
While the biggest driver of the movement has been foreign currency challenges, policy inconsistency has also been a major contributor,” stockbrokers FBC Securities said.
FBC added: “We recommend that the investor develop a well-diversified portfolio that should mitigate the entire portfolio from sector or asset class specific risks.”
It said the portfolio should be future oriented, long-term and selected instruments should be poised for a positive return through both capital gains and dividends, thus meeting the investor’s objective.
“It will be prudent to consider about 40% of the portfolio for active trading, as this will allow the investor to realise some profits in the event of short-term swings in sentiments in the market, in particular on non-core holdings,” FBC Securities said.
Investors have, however, limited choice as other investment classes such as the money market have low yields and remain unattractive and susceptible to inflation erosion.
This comes despite the central bank recently hiking the minimum deposit rates to 40% and 80% for savings and time deposits respectively and increasing the bank policy rate to 200%.
FBC Securities said the upward review is likely to fall short in curbing speculative borrowing and encouraging deposits long-term as inflation remains elevated, eroding the value of the local currency.
“Investment on the local fixed income continues to largely be driven by fund managers, insurance companies and pension funds for liquidity management and prescribed asset compliance,” it said.
Multiple analysts said while the ZSE performance has been subdued due to policy interventions and liquidity constraints, the underlying fundamentals previously driving investment on the stock exchange remain in place.
