Tawanda Karombo Harare
MARKET watchers and analysts expect the Zimbabwe Stock Exchange (ZSE) to slow further in the next few months as the country’s economy continues to encounter problems.
These emanate from a tight liquidity environment and low investor interest, fuelled by fears of further stagnation.
The Zimbabwean market has largely been sustained by foreign investors, whose interest has propelled stocks such as Delta Corporation, a division of SABMiller. Interest from foreign investors has also been strong in Econet Wireless, Hippo Valley – controlled by Tongaat Hulett – and fast foods operator Innscor Africa.
EFE Securities analyst Respect Gwenzi said on Friday that the “month-on-month turnover [for July] dipped 12 percent to $25.2 million (R268m)”.
Compared with turnover for July last year, the figures for last month were a massive 42 percent down.
“The monthly decline was against a dearth in local demand which as the liquidity crunch continues to worsen,” Gwenzi said in a report.
Econet, the leading Zimbabwean telecoms firm controlled by businessman Strive Masiyiwa, contributed the most to turnover, backed by strong interest from investors drawn from outside the country’s borders. It clocked up $5.6m in turnover, followed by Delta Corporation, with a total of $4.8m.
There was also strong interest in CBZ Bank and Innscor. Other companies that have continued to do well in Zimbabwe include Barclays Zimbabwe, whose interim profit doubled to $1.7m, and Zimplats, which said last month that quarterly revenue increased by 32 percent to $166m.
“Foreigners accounted for 75 percent of the total purchases in Econet while a fair chunk of trades in Delta was also foreign, attributable to a firming foreign preference for selected blue chip stocks,” the EFE Securities report said.
Equity purchases by foreigners – who invested about 83 percent of their funds in the top counters on the ZSE – rose by 4 percent to $15.57m. Foreign investors made up 62 percent of the month’s turnover while their disposals were said to be minimal compared with previous months.
On Friday, foreign share purchases on the ZSE closed at $2.6m while foreign disposals were slightly less at $2.5m. Econet, Delta and Cottco were the stocks that foreign investors were most interested in.
Market traders in Zimbabwe told Business Report that trade dealings on the ZSE had largely remained resilient, with investors attracted to counters that were showing strong fundamentals. This was in contrast to investments in other sectors of the economy that had slowed down.
“It’s a delicate strategy that investors are employing on Zimbabwe; the stock exchange is attractive but only as far as the top counters are concerned. International investors are resisting all other sectors of the economy and are just waiting for signs of improvement,” a market dealer said on Friday.
Most companies are putting expansion plans on hold, with Aquarius Platinum saying on Thursday that it would only make the decision to expand its jointly owned Mimosa mine by next year. Last week Impala Platinum vetoed suggestions by its Zimbabwe management to invest $500m in a refinery upgrade, saying this had to be preceded by a conducive business environment.