LIVINGSTONE MARUFU
The Zimbabwe Stock Exchange (ZSE) market capitalisation will hit about ZWL$3 trillion by year-end if the local bourse continues to track the parallel market movement, a securities firm has said.
The performance of the stock market is closely followed by investors as the bourse is seen as mirroring the performance of an economy.
This week the value of all shares of companies listed on the bourse was hovering around ZWL$1.7trillion.
“…The market capitalisation will end at about ZWL$2.9 trillion which implies a growth of 78%.
“The fact that we do not expect the market to register significant gains in real terms implies that stock picking will be of paramount importance in 2022,” securities firm, Morgan & Co said in its report, Zimbabwe 2022 Economic Outlook.
The research firm said the financial services sector remained attractive and foresees potential upswings and corrections in the market.
The firm also said there was a general consensus that the Morgan & Co Multi-Sector Exchange Traded Fund was overweight in financials.
“The consumer sector also remains an interesting division given the defensive nature of food and the likely gains that could come through any form of improved disposable incomes.
“On asset class, the real estate or property sector remains predominantly a US$ asset in Zimbabwe and presents liquidity constraints for medium-term investors,” the report said.
The report said the bourse will be 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.
Morgan & Co’s 2022 picks include Art Corporation, FBC Holdings, First Capital, Hippo Valley, ZHL and Innscor, among others.
“Art Corporation’s battery division contributed 84% of the total revenues for 20221 and Chloride Zambia is the company’s main source of export revenue and the largest distributor of batteries in the country. The hard currency generation and regional diversification is expected to protect ART from country-specific risk.
“FBC Holdings is expected to benefit from positive economic support outlined in the 2022 National Budget as the agriculture sector is likely to drive transactions in 2022.
“First Capital Bank’s loan to deposit ratio increased to 45% during HY2021 from 27% FY2020 following the reduction in inflationary trends and the reopening of the economy therefore the bank is expected to perform fairly well,” Morgan & Co said.
The research firm said the Hippo Valley was well positioned and is the largest player in Zimbabwe with a market share of 53% and miller faces fewer constraints given the strong production figures from supporting private farmers hence it is expected to do well in 2022.
Cash rich Innscor’s good performance is also expected to be anchored on the procurement of locally produced produce following forecasted good rains in 2022 and likely going to benefit from regional diversification.
ZHL is expected to be a good performer in 2022 as it has presence in Malawi, Zambia, Mozambique and Botswana and these units contribute the company’s foreign currency revenue hence that is also expected to buffer local operations, Morgan & Co said.
The bullish sentiments exhibited on the ZSE in 2021, resulted in a 314.37% increase in market capitalisation to end the year at ZW$1.3 trillion, compared to ZW$317.88bn reported in December 2020.
The All Share, Top 10, Small Cap and mining indices registered gains of 310.51%, 307.51%, 3 280.46% and 89.05%, respectively, to close at 10 822.36 points, 6 811.43 points, 402 753.21 points and 7 815.37 points, respectively.
The cumulative volume and value of shares traded increased by 109.64% and 276.50% to 7.84bn shares and ZWL$65.2bn, compared to 3.74bn shares and ZW$17.33bn recorded in the previous year, respectively due to improved trading, coupled with a significant number of block trades registered on the local bourse during year under review.
Foreign investors’ participation improved over the period under review, reflected by cumulative net inflows of ZWL$9.74bn realised in 2021, compared to net inflows of ZW$5.01bn registered in the previous year.
