21 December 2012

Zimbabwe: 'Year's Market Moved By Foreign Investors'

Photo: IRIN
Zimbabwe's capital, Harare

THE Zimbabwe Stock Exchange (ZSE) is heading for a lukewarm close after trading this year was largely subdued by low liquidity of domestic investors, election concerns and negative perceptions surrounding implementation of the country's economic empowerment programme.

Stockbrokers who spoke to businessdigest this week said relatively flat interest by foreign investors during the year under review had seen them concentrating on a few counters.

However, they said the market has been driven by fundamentals, not sentiment.

Imara Stockbrokers MD Thedias Kasaira said the market had largely been moved by foreign investors in 2012.

"There has been strong interest in the blue chips which include Delta, Econet, Dairibord, OK Zimbabwe and BAT," Kasaira said.

"This is mainly because these companies have been capitalised by shareholders and are performing well. They do not require any major funding."

He said going forward investors would be seeking companies with the best prospects of rewarding shareholders through dividends.

Kasaira said negative perceptions around the indigenisation programme had restricted inflows onto the ZSE this year and curtailed interest in the generality of the investment market.

"In itself, the indigenisation law is a good law, but investors have been sceptical about how it is being implemented. It's about interpretation," he said.

Kasaira said there had been good progress on the capital markets with respect to modernisation of practices.

"Our regulator, the Securities and Exchange Commission has been pushing for mordenisation of the market through the introduction of the Central Securities Depository (CSD) and the electronic trading.

These programmes are at an advanced stage of implementation but we have indicated to the authorities that we should do the CSD first and then electronic trading will naturally follow," he said.

Kasaira said talk of elections have also made investors jittery.

"This market has been traditionally sensitive to any talk of elections. However what makes it worse is that there is no clarity about when the elections will actually be held, it's the uncertainty that somewhat depressed the market in 2012 as a lot of investors generally start to defer investment decisions."

MMC Capital MD Edward Mapokotera said the market would probably have a near-flat trading year.

"We do not see much more buying and selling activity until the end of the year," Mapokotera said. "Last year, we had a number of large trades and a bit of a price rally on some counters but this year, liquidity is very tight."

He said domestic institutional investors had not contributed much to activity on the ZSE owing to low free investible funds.

"Despite growth in pension collections and other insurance premiums insitutional investors have had little surplus left to invest in the market. Expenses and claims have been high, leaving local insititutions who were traditionally big players on the markets with little to invest," Mapokotera.

Despite mounting liquidity challenges there were 24 counters advanced during the year against 47 that lost value during the year. Eight counters were suspended from trading and there was no movement in their share prices.

Despite a recent share price drop after the company faced an inquiry from the authorities following allegations of industrial espionage, BAT Shares still recorded a 139% growth on the back of huge dividend payments and strong results.

The ZSE top riser was Astra Holdings rallying 150% this year as government made concrete its intensions to dispose of its 63% shareholding in the group. The share opened the year at 2UScents but traded at 5UScents on Wednesday this week.

Afre was the number four stock with a year-to-date return of 73,33% after renowned Actuary Douglas Hoto bounced back as CEO at the country's second largest insurance firm, putting closure to the company's problems emanating from governance failures. The group also held a successsul rights issue in October which raised US$8,5 million to strengthen its operations.

Food processor National Foods benefited from its alliance with major shareholders Tiger Brands.

The group posted pleasing results for the year ending June 30, 2012, with profit before tax from continuing operations at US$10,7 million showing a share price growth of 47%.

Strong volume growth of 15%, better operational efficiencies and focus on the core business, and a strong turnaround in the maize, flour and stockfeeds bettered the company's prospects.

Rio Zim shares recovered after the group announced the arrival of new shareholders who recapitalised the group.

Earlier this year the group announced the departure of lackluster CEO Josh Sachikonye who made way for Ashton Ndhlovu. UK based investment fund Global Emerging Markets invested US$11 million in the group. The gold miner's shares put on 48,57% in value as at the close of business on Wednesday, making it the fifth performing share this year.

Ariston Holdings shares rose 44,44% in 2012 after the horticulture firm concluded a US$8 million rights offer which was underwritten by the South Africa-based Afrifresh.

Top retailer OK Zimbabwe also continued to reap the benefits of a major investment by Investec in the group putting on 40% on the back of strong earnings.

Not to be outdone on the top 10 list was Delta Corporation, whose share rose 36% in the year. The company market capitalisation also hit US$1 billion dollars in October 2012 making it the most valuable company on the stock exchange.

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