Stocks are expected to extend their bull run on the Zimbabwe Stock Exchange (ZSE) this year with some swings along the way as optimism about excess liquidity and expectations of higher government expenditure are likely to drive investments to the local bourse, experts have said.
The excess liquidity is expected to find its way to the local bourse.
The stock market closed 2021 in favour of the bulls.
At the end December 2021, the market capitalisation stood at ZWL$1 311 740 000.89 from ZWL$317bn in January last year.
Stock prices rallied in the past two weeks to ZWL$1 334 500 436 145.29 on Tuesday this week.
Market analyst and researcher, Batanai Matsika, expects the bull run to persist this year investors would be pushing to hedge their investments.
He also believes that improved export receipts will lead to improved activities which will lead to improved disposable incomes which will also heighten spending.
“This year, we expect a lot of investors to use the stock market as a value hedge. What we expect to happen is that the stock market will lag behind the exchange rate where it will rerate which then causes a bull run to come through.
“We are expecting a bull run and the economic agents to align with exchange rate development,” Matsika said.
He expects a rerating of the parallel market exchange rate due to excess liquidity in the market.
The parallel market exchange rate is hovering around ZWL$230: US$1.
“When there is government expenditures, most of that money will find its way to the stock market, that is where we expect a bull run due to some rerating that would have taken place,” he said.
Matsika expects the consumer service sector companies which include food, retail and financial services to perform well in 2022 with banks expected to be at the top of the table.
“You find that when there are a lot of activities, transactional elements also peak up. The banks will push the stocks and the economy as more transactions will earn the financial services sector commissions and fees.
“They will be more innovations that will happen, improvement in transactional point of view.
“Over and above that, I think we need to note that with some level of stability and seeing the inflation coming down to around 50% from as high as 800%.What that means from a banking or lending point of view is that banks can now start to lend,” Matsika said.
In the banking and financial services sector, there was an improvement in loans to deposit ratio where it moved to around 50% in 2021 from around 30% in 2020, this means bankers have now moved out of shells to start lending.
Therefore that improvement in lending activities will give them a small total income because of the stability in exchange rate and the macro-economic environment.
Analysts tip banks and consumer driven companies to push the bourse in 2022 as the stock market is expected to rerate in terms of the obtaining exchange rate.
Imara Capital managing director Thedias Kasaira also expects the bull run to continue this year.
“As long as we are in this inflationary environment, we expect the bull run to continue just like last year. Unless there is a sudden change of events but as it stands here we go again and again,”Kasaira told Business Times.
The ZSE chief executive officer Justin Bgoni believes the 2022 bull run will be anchored by agriculture and a stable environment.
“The exchange still remains a viable option as the best preserver of value both against inflation and exchange rate losses. With the good rains expected this year, a great agriculture season is expected to bring better returns on ZSE.
“A decline in inflation and the stable local currency will result in significant growth in the participation of investors on the bourse,” Bgoni said.