Stock bulls creep back in surprise ZSE turnaround

PHILLIMON MHLANGA

The value of stocks swung to ZWL$2.442 trillion in January from ZWL$1.691 trillion in December as bullish sentiment returned to the troubled Zimbabwe Stock Exchange (ZSE).

The charging bulls, multiple analysts believe, are eyeing further gains going forward.

They said ZSE will not have another down year. Instead, they believe a bull market, a condition in stock markets in which prices of an asset or securities are trending higher by more than 20% from recent lows, will dominate the market. Usually, bull markets are characterised by optimism and investor confidence.

The ZWL$751bn gain in January was the highest one-month bull market gain in decades.

Despite the elevated level of uncertainty for investors who have parked their cash at the ZSE, multiple analysts still expect a further uptick this year after a solid rebound in January from December low of ZWL$1.691 trillion.

Perhaps, they have been swayed by the speed of January’s bull market.

“It’s the fastest (bull market) in the ZSE market history. Investors should expect more normal returns going forward,” an investment analyst with a local commercial bank who preferred not to be named, told Business Times this week.

In its latest report published this week, Securities firm, FBC Securities Limited said: “We anticipate a general bullish sentiment to prevail on the stock market.”

The report continued: “However, gains may be moderated by inflation tightening measures that may limit availability of liquidity. We believe investors should consider companies with diverse business models, inflation hedging capabilities and foreign currency generation capacity, in the counter selection process.”

Another securities firm, Morgan &Co said: “We are bulls on the consumer, food and agriculture and financial services sector. Blue chip names like Delta Corporation Innscor Africa Limited, Hippo Valley Estates and Meikles Limited, have a mix of defensive and quality characteristics. The counters are expected to maintain a strong earnings visibility while also continuing to benefit from the benefits of electioneering   activities.”

Zimbabwe will hold this election between July 26 and August 24, 2023, according to the Zimbabwe Electoral Commission chairperson, Priscilla Chigumba.

After rising to ZWL$3.6 trillion in April last year from ZWL$1.3 trillion in January last year, a bear market, a decline of  more than 20%  of the peak value of the stocks, pounded  the market, wiping out about 53% of stock value or ZWL$2 trillion to  close the year at ZWL$ 1.691 trillion.

High annual inflation of about 244%, high interest rates at 200% per annum, a slower gross domestic product growth (GDP) and measures put in place by the government to curb speculative activities, including money tightening policy, were some of the major factors that kept the stock market in a volatile state, with the bear market ravaging the stock market last year.

In real terms, according to research firm Morgan & Co, the stock market lost about 40% of its value.

The troubled economy has since forced the Minister of Finance and Economic Development, Mthuli Ncube, to revise downwards this year’s GDP growth projection to 3.8% from the initial 4.6%.

Naturally, given the expectations of an additional concern of a slower economy, the market fundamentals, such as corporate revenue and earnings, are likely to come down as well.

That’s an additional concern going forward for the ZSE.

However, since the low of ZWL$1.691 trillion at the end of December last year, the stocks have moved out of the bear market territory surging 44% or gained ZWL$751 billion this month alone, largely driven by heavies or blue-chip counters.

While the Zimbabwe dollar denominated ZSE has faced challenges last year including high transaction costs and acute regulation, the  United States dollar denominated Victoria Falls Stock Exchange, has remained largely stable as it has not been susceptible to abrupt policy changes and currency volatility.