Harare — The strong rally witnessed on the Zimbabwe Stock Exchange in the previous week immediately came under a check during the week ended yesterday, as investors descended on the high yielding investment market to pocket gains reaped in the preceding week that saw the market awarding the highest weekly return to investors since the beginning of the year.

Having seen the industrial index and the mining index firming by a tremendous 17,76 percent and 21,41 percent correspondingly during the prior week, investors opted to pocket their returns, consequently resulting in a depressed performance of the ZSE during the week under review. After fully pricing in the elimination of some increase in sovereign risk arising from escalating political noise amongst the principals in the Global Political Agr-eement, the stock market had been over-bought. The development subsequently led to a sell off during the week that led to the industrial and the mining index shedding 6,5 percent and 9,57 percent respectively to close the week at 160,76 points and 211,77 points.

Such market behaviour is indicative of strong speculative motives currently imbedded in the majority of the investors' investment strategy on the local bourse. Topping the fallers in the week were financial concern, FBCH that shed 30 percent of its opening week's price of 4 cents to 2,80 cents followed by Colcom that went down 29 percent to 20 cents from 28 cents. Radar, Bindura and Steelnet complete the list of top five losers after retreating 28 percent, 26 percent and 25 percent respectively to close the week at 18 cents, 22,10 cents and 0,30 cents respectively. In comparison to the previous week that only recorded six fallers, this week saw a total of 32 counters trading in the red. Pharmaceutical concern Medtech emerged the top mover in the week, gaining by 80 percent to land at 0,18 cents from its opening price of 0,10 cents. Tedco and Zim-papers firmed by 67 percent and 43 percent respectively to 1,50 cents and 1,00 cents respectively, with Fidelity and PGI completing the top five movers after gaining by 28 percent and 24 percent correspondingly to 5,10 cents and 10,50 cents in that order.

There were only nineteen gainers during the week compared to the earlier week that saw a total of 51 counters movers. The stock market is expected to continue trading sideways ahead of the end of the year and the festive season. Short term investors are expected to stay close to their cash whenever the ZSE offers such opportunity while other institutional and related investors would be restructuring their portfolios ahead of the new financial year. Investment basics of buying when the stock market is at its bottom and selling when it has reached its peak is apparently critical for short term investors who thrive on the volatility of the stock exchange. For long term investors, it is imperative to identify companies that have reported improved capacity to meet market demand, such as Delta, Innscor, Na-tional Foods and Lafarge. Companies that enjoy competitive advantages over their business rivals like Econet and Seed Co should also be considered by long term investors in their security selection.

Corporates with high growth potential (e.g. Zimplow, CBZ) and ag-gressively and expertly managed companies that would be able to expand their market share under the obtaining macro-economic conditions may also be considered. Meanwhile, the Grain Marketing Board managed to raise US$1,6 million thr-ough grain bills issued last Thursday (12/11/09) to finance grain purchases. The tender, with CBZ acting as the financial advisors to the fund raising exercise, was open to pension funds, insurance companies, life mutual, commercial banks and other interested institutions as well as individuals to subscribe for grain bills amounting to US$2,5 million. Results of the first issue of the grain bills on indicated that the bills were under-subscribed with total bids amounting to US$1 895 000, with US$1 630 000 being allotted in the tender. The weighted average rate for the allotted was 21,32 percent.

The highest bid for the tender stood at 40 percent while the lowest bidder quoted 15 percent for the 90 day bill. It must be noted that the quoted rates in the tender are exorbitant, relative to those prevailing in regional and international markets, a situation attributed to the protracted liquidity crunch the economy continues to battle under due to depressed foreign currency inflows.

Liquidity on the market remains at critical levels as indicated by the thin deposit base on the local financial sector, estimated at US$1 016 billion as at 31 October 2009. South Africa's 90 day treasury bill rate is currently being quoted around seven percent while that in the US, the same paper is attracting a rate around one percent. The cost of capital for the local economy is therefore punitive, with the effect of suppressing economic growth. It is hoped that the oncoming Fiscal Policy Statement to be announced by the Minister of Finance will propose measures aimed at improving foreign currency inflows through mainly export receipts and foreign direct investment while at the same time advocating for measures that limit foreign currency hemorrhage out of the economy.