Financial Gazette (Harare)
Chengetai Zvobgo
4 June 2009
Harare — The equities market was flat this week despite more money being pumped into the market.
Investors have been using this period to switch from one counter to another in a bid to restructure their portfolios.
There was a slight increase in the value of trades with US$11.7 million having been traded in the week compared to US$10.6 million in the previous week.
There has been a significant increase in value of trades, which averaged 0.005 percent of market cap in March, during a period of liquidity challenges, to 0.1 percent of market cap as at Tuesday (02/05/09).
It was thus not surprising when Finance Minister, Tendai Biti, said the credit lines that have been extended to Zimbabwe so far had increased money in circulation to around US$300 million from less than US$50 million in January.
The Industrial Index shed 1.93 percent in the week to close at 138.73 points while the Mining Index lost 1.22 percent to close at 290.16 points.
Movers in the week were led by Caps, up 60 percent at 4 cents, followed by Nicoz, up 50 percent at 1.5 cents and Turnall, up 37.5 percent at 2.2 cents.
Tractive and Astra capped the top five movers.
Shakers were led by Gulliver, down 45 percent at 1.1 cent, followed by Edgars, down 44 percent at 5 cents and Truworths, down 40 percent at 1.2 cents.
Redstar and ZHL completed the week's top five losers. There were 22 gainers and 39 shakers.
We strongly believe that equities remain the asset of choice for long-term portfolio performance.
As economic growth improves, there should be a gradual transition from the high-risk stocks to the higher-quality ones with solid fundamentals that could profit from earnings momentum.
Investors should focus on finding companies with strong management (innovation, flexibility), strong financials, dominant franchises and the ability to grow within their industry, all at a reasonable discount to the company's ability to generate future cash flow.
Investors should use any short-term weakness as an opportunity to add to existing long positions or to buy into long positions in quality stocks.
It should, however, be noted that the sustainability of the current positive developments in the economy, is a function of developments on the political front.
This is because a stable political environment brings about an improvement in the country's sovereign risk, which is essential in attracting foreign investment.
In this regard the accusations and counter-accusations between the major players in the inclusive government on fulfilment of the Global Political Agreement (GPA) are likely to dampen investor confidence.
If there is no major breakthrough, international investors, whose interests in the local market has been on the increase lately, would most likely shun the market in search of other less risky markets.
Foreign interest has been touted as the major driver of the market in the last five or six weeks.
Meanwhile, the South African rand was steady in early trade on yesterday, taking a breather after a strong rally.
The rand was trading at R8.00 against the US dollar, unchanged from its previous close in New York.
But traders said a stronger euro and international data that continued to point to signs of recovery in the world economy could help support risk appetite and maintain rand strength.
The rand reversed direction after touching a near-9-month high against the US dollar on Monday, knocked partly by comments from central bank governor Tito Mboweni expressing concern about the impact of the rand's gains for the wider economy.
The remarks raised speculation that the bank would intervene to weaken the currency. The rand has firmed about 15 percent on the US dollar and almost 14 percent against the euro this year.
In commodities markets gold hit a three-month high of US$988.00 this week, helped by a weak US dollar and concerns about rising prices after governments around the world boosted spending to try to rescue their economies from the global financial meltdown.
The precious metal remained steady as investors continued to track moves in the US dollar, remaining within striking distance of the key US$1,000-an-ounce mark.
A softer US dollar typically boosts gold, both because bullion can be bought as an alternative to the US currency and because its weakness makes dollar-priced commodities cheaper for non-US buyers.
The two assets had given up their traditional relationship as both reacted primarily to risk aversion.
But as optimism grows that the worst of the economic downturn is over, their usual trading dynamic has returned. Other commodities such as oil have also extended gains on a brighter economic outlook, another reason fanning fears of a medium to long-term inflation.
US crude futures slipped on profit taking on yesterday after rising to a near seven-month high of US$68.68 per barrel the previous day on hopes for an economic recovery.
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