22 November 2007

Zimbabwe: Equities Soften On Profit Taking

Harare — The equities market softened due to profit taking after a fine rally in most counters though trade was characterised by thin volumes. There was a gradually retreat in the market from 14 November 2007 to Tuesday, 20 November 2007 before the market gained yesterday.

This was reflected by the fall in the industrial index of 9.15 percent from 14 November to close at 518,906,981.71 points yesterday. The mining index also fell by 5.85 percent to close the period at 658,757,922.62 points. In the period being reported, there were just ten counters that gained with fifty-three trading in the red.

Yesterday, there was a new momentum in the stock market as investors left with few investment options were back, looking for bargain stocks. This resulted in a 12.54 percent jump in the industrial index driven by a market wide rally in most counters. Amongst the heavy weight counters that gained included the beverages counter, Delta, conglomerate, Meikles, insurance giant, Old Mutual, investment company, TA and the financial services giant, Barclays. The mining index gained by 10.23 percent to close the day at 658,751,922.62 points.

In the outlook, we expect the stock market to remain bullish driven mainly by the mismatch between investment rates and inflation. Another factor that should lead to a bullish outlook for the equities market is the limited number of investment options on the local market. There may however, be some elements of profit taking as investors await the announcement of the 2007/08 Annual Budget this months and the Monetary Policy Statement by the Central Bank Governor.

Meanwhile, the money market opened the week with an actual position of Z$226 billion down on Wednesday (14/11/07) after being forecast to close up to the tune of Z$4 trillion. This was as a result of government expenditure that included civil servant salaries coupled with Central Bank's quasi-fiscal operations. A total of Z$1.3 trillion and Z$1.5 trillion was allotted into the 365 days treasury bill tenders and the Insurance Bond tenders respectively indicating the easier liquidity conditions that continue to sit in the money market.

Thursday (15/11/07) saw the money market closing short to the tune of Z$1.6 trillion after receiving less than expected inflows from government expenditure and related RBZ quasi fiscal injections. A forecast position of Z$3.1 trillion had been predicted for the day in anticipation of the usual government and Central Bank inflows.

The same day had Z$1.2 trillion bids allotted into the RBZ treasury bill tenders at 340 percent with Z$228 billion being committed into the 3 year Insurance Bond at 300 percent.The following day Friday (16/11/07) the market closed the week easier, recording a forecast long position of Z$3.9 trillion and an actual position of Z$223 billion down with Z$1.7 trillion being allotted in the 365 days treasury bill tenders and Z$50 billion finding its way into the 3 year Insurance Bond.

Monday (19/11/07) saw a surprise forecast position of Z$280 billion up being given for the day despite huge outflows in the form of Statutory Reserve payments that were expected to drain the market of its liquidity. An estimated Z$3 trillion was expected to be pumped into the market by the Government and the RBZ, dampening the effects of leakages through Statutory Reserve Payments. The market later closed the day Z$3.5 trillion down after the expected funds failed to come into the market. The day witnessed Z$140 billion and Z$280 billion being allotted into the Treasury bill and insurance bond tenders at the respective rates of 340 percent and 300 percent.

On Tuesday (21/11/07), the market was expected to close Z$5.4 trillion up owing to heightened efforts by the government to fund the productive sectors of the economy through availing concessionary funding to various players on the productive chain. A total of Z$1.7 trillion got allotted into the 365 days RBZ treasury bills at the unchanged rate of 340 percent with Z$50 billion being channelled into the 3 year Insurance Bond at the rate of 300 percent. The market however closed the day short to the tune of Z$195 billion after some funds from the Central Bank failed to sail into the market.

Investment rates during the week continued on the downside with the 7-14 day monies attracting rates well below 50 percent. The longer end of 60 day monies was being quoted at an average rate of 80 percent whilst the 90 day monies were attracting investment rates averaging 100 percent.

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