LIVINGSTONE MARUFU
High inflation anxiety will drive stocks back into the bulls’ territory as investors push to preserve their money, multiple analysts have said.
The value of stocks in recent months has been tumbling in response to the government’s poor policy measures.
On Tuesday this week, the Zimbabwe Stock Exchange (ZSE)’s market capitalisation was ZWL$2.6 trillion from more than ZWL$3 trillion in April this year.
The annual inflation rate for the month of June is 191% from 131% in May.
However, market analysts said the stocks will rerate and catch up with inflationary trends.
Morgan & Co research head Batanai Matsika told Business Times that the drive to preserve money is likely going to push up stocks.
“What we are seeing in terms of the inflation curve that has hit above 191% shows the depreciation of the local currency with the rate hovering around ZWL$650:US$1. This has affected the investors’ funds and the likely scenario is that the stock market will catch up with the obtaining inflation as the investors would move to preserve value,” Matsika said.
He said the stocks have derated due to measures put in place in May but the fact that major players in the market are going for the assets to preserve value the bull run is expected.
“The need to preserve value is going to drive the demand for assets and the prices are going to go up accordingly,” Matsika said.
Another market analyst who preferred anonymity said volatility in the market has affected forecasting as the movements in rates are now too much.
“Despite the challenges on the bourse, it remains the most feasible option to preserve value on Zimbabwean capital markets as cash and money market instruments are not the best option given that there is a higher expectation of deterioration in inflation fundamentals hence a huge movement is expected towards the year end,” he said.
“On asset class, the real estate or property sector remains predominantly a US$ asset in Zimbabwe and presents liquidity constraints for medium-term investors.”
Experts said the financial services sector remained attractive and foresees potential upswings and corrections in the market.
The consumer sector also remains an interesting division given the defensive nature of food.
The ZSE CEO, Justin Bgoni said: “We do not predict markets. (But), we are excited that there will be new listings in terms of real estate investment trusts , exchange traded funds (ETFs) on ZSE, and debt, equities and ETFs on Victoria Falls Stock Exchange.
“We understand that there is uncertainty in the market at the moment and we are hopeful that the market capitalisation will be higher at the end of the year,” Bgoni said.
