4 February 2013

Zimbabwe: ZSE Eyes U.S$5 Billion Market Cap

EQUITIES firm IH Securities has projected that the Zimbabwe Stock Exchange market capitalisation will register a 17 percent growth to US$5,7 billion this year, amid expectations that the post-election Government will bring positive economic policy shifts.

The financial analysts also contend that foreign buyers, generally hesitant globally prior to a plebiscite, would continue driving trades on the ZSE as in the past year when they accounted for 41 percent of ZSE's turnover from 13 percent in 2011.

But IH Securities believe the next election, regardless of the outcome, presents a catalyst for positive policy shifts that can stimulate higher and sustainable growth while also strengthening investor confidence in the domestic economy.

President Mugabe is expected to proclaim the election dates any time soon after the national referendum on the new constitution whose drafting has already been concluded with the revised draft set to be tabled before Parliament tomorrow.

"We are forecasting a target market capitalisation of US$5,69 billion for financial year 2013, implying upside of 17 percent. We remain cautiously optimistic on the equities in Zimbabwe. We are optimistic that regardless of the (election) outcome, the prevailing Government will find itself under pressure to focus on constructive policy direction," IH Securities said.

The securities firm's market cap growth forecast follows a 10,46 percent growth in the ZSE's market capitalisation to US$4,38 billion last year despite the mining index falling by 35,33 percent as the industrial index only returned 4,48 percent.

Expectations are that liquidity on the ZSE would be thin ahead of the forthcoming election, thereby driving share prices up as already evident with the ZSE's main industrial index after it gained 17,89 percent on a year-to-date basis. IH Securities contends that while Zimbabwe's economy will grow in line with the Sub-Saharan Africa estimated average growth rate of about 5 percent, it had the potential to do better.

Finance Minister Tendai Biti has forecast the economy to grow by 5 percent, driven by mining and agriculture, which are seen expanding 17 and 5 percent, respectively.

But IH Securities said proactive and consistent Government policy would be essential for the country to attain growth rates closer to its potential. It also believed that the 2013 election presented a potential catalyst for a growth stimulus as the post-election Government would be more focused on policies to improve the domestic economy.

Growth of the ZSE industrial index has been underpinned by large stocks such as Delta, which gained 42,9 percent, Econet 12,5 percent, Natfoods 53,5 percent, BAT 132,3 percent, Innscor 28,4 percent, Dairibord 10,5 percent and OK 50 percent.

On the downside were financial stocks ABCH 42,1 percent, CBZ 28,6 percent and Barclays 39,5 percent.

Seed Co and Aico also lost ground, dragging the index down after shedding 30 percent and 52,6 percent, respectively.

The industrial was up 2,64 points (1,47 percent) to close at 181,98 points last Friday. Innscor added US9,50 cents US100,01c, PPC gained US4c to US215c and Old Mutual inched up a cent to US181c. OK rose US0,98c to US18,01c, CBZ advanced US0,61c to US11,11c while Aico and Colcom were US0,50c firmer at US11c and US25,50c respectively. TSL pushed up US0,49c to US13c and Truworths was up US0,30c to US3,20c.

The ZSE, generally, underperformed compared with its Sub-Saharan Africa with Kenya's Nairobi Securities Exchange returning 39 percent, Nigerian Stock Exchange returning 34,4 percent, Egypt 26,9 percent, South Africa's FTSE/Johannesburg Stock Exchange 22,7 percent, Botswana's Gaborone index 7,7. Mauritius and Zambia lost 8,3 and 10,7 percent, respectively.

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