28 February 2013

Zimbabwe: ZSE Rally Passes Property Stocks

ZIMBABWE Stock Exchange-listed property counters have not benefitted from a rally on the domestic bourse, which has seen growth in trades and prices for most stocks, although mostly blue chip counters.

Property counters have been experiencing mixed trading this month.

Common investment strategies suggest that in any environment, investors hedge against negative real returns by seeking refuge in non-interest bearing assets such as equities, the property market and the currency market.

Property stocks, the safest form of investment in any environment, were expected to be among the most sought after given the uncertain environment ahead of the elections. But these have lagged behind telecommunication, mining and some agro-based counters.

Analysts cited the persistent liquidity crisis as the reason why some investors were not attracted to property counters, which are usually long term investment options.

Dawn Poperties' share price has been hovering between US0,80c and US0,90c, while Mashonaland Holdings has been trading at between US2,40c to US2,50c this month.

Pearl Properties has been trading within the US2,50c and US2,70c range, while Masimba, formerly Murray & Roberts, has been trading at US2,40c and US3c.

Zimbabwe Property Investments (ZPI) has been trading between US1,10c and US1,20c since the beginning of the month.

Other property-linked companies, such as Larfarge and Pretoria Portland Cement (PPC), have had better prices, although this could also be due to the fact that some of these stocks, like PPC, are tightly held.

Larfarge's trade ranged between US$0,60 to US$0,70c, while PPC had trended towards the US$3 mark.

Market analysts said property counters such as Dawn, Pearl Properties and Mashonaland Holdings were expected to trade mixed.

Counters such as Masimba and Larfarge are, however, expected to improve and be more attractive because of the demand for cement and increased construction as the industry's capacity utilisation has increased to about 40 percent, from 33 percent.

There, however, is a very small mortgage market in Zimbabwe, resulting in stunted growth in the construction industry.

In South Africa, listed counters led by property linked companies' outperformed cash, bonds and equities last year, with total returns of 36 percent to become the country's best performing asset class for the fourth consecutive year.

South Africa expects 2013 to be another good year for the property sector, that can uniquely predict its short-term performance due to the fact that its performance is underpinned with rental income from contractual agreements.

In Zimbabwe, future growth is expected to be driven by investment-related activity such as power generation, mining and telecommunications.

The property sector is also facing low demand in the housing market and property-related fixed assets due to high building costs.

While returns on properties had exceeded inflation and other investment vehicles, few in Zimbabwe consider buying a property as an investment than securing a family home.

Many who buy more than two properties would want to invest in something else but have no adequate information on what else to invest in.

"When markets engage in a rip-roaring bull market, there is nothing that matches the excitement and the sheer speed with which investors can make money on the stock market. While property prices often move in a group, if the stock market index were to double this would be the average of a vast spectrum of movements with many shares rising far more than 40 percent, spreading the returns across many counters," a stockbroker said this week.

Foreign participation is expected to dominate trading on ZSE this year given the eventual prospects of high and sustainable growth on the local economy and listed counters.

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