The Sunday Mail
LOCAL stocks continued plunging last week, sinking to the lowest level in two years, but market watchers believe they will rebound, propped by the recent interest rate cut.
The Reserve Bank of Zimbabwe (RBZ) on August 5 capped interest rates at 18 percent, almost half the cost of money obtaining on the market.
Short to medium-term deposit rates have remained below 10 percent.
After the close of trading on Wednesday, the mainstream industrial index had plummeted 41 percent to 137,73 points from its five-year peak of 233,18 points reached on August 1, 2013.
This year alone, industrials have slumped 16 percent.
The mining index crashed 50,4 percent on a year-to-date basis to 35,59 points from the record high of 273,04 recorded on June 23, 2009.
In the week to August 19, the total ZSE market capitalisation declined 3,7 percent to US$3,61 billion from US$3,75 billion a week earlier.
On the overall, the market lost US$140 million in value in the year under review.
Heavily capitalised counters fell the most on lower economic growth projections and poor earnings’ results.
The economy is now expected to grow 1,5 percent this year from the previous 3,2 percent estimate due to poor output in agriculture, according to Finance and Economic Development Minister Mr Patrick Chinamasa.
During the week to Wednesday, beverage maker, Delta Corporation, slumped 9,2 percent to US87,61c, while telecommunications firm Econet lost one cent to US28c. Econet is down nearly 70 percent from its US85c peak last year.
Seed house, SeedCo Ltd, dropped 3,6 percent or US3,75c to US$1 and OK Zimbabwe fell 15,7 percent to US7,5c.
Dairibord Zimbabwe Ltd lost 6,3 percent week-on-week to US7,5c after reporting revenue in the six months to June 2015 rose 10 percent to US$47,9 million.
CBZ Holdings Ltd, the country’s biggest bank, traded unchanged at 9,98c after saying net profit in the half-year to June 2015 climbed 17,4 percent to US$13,7 million from US$12,8 million a year ago.
In minings, Bindura Nickel Corporation Ltd slid 6,7 percent to US2,80c and coal producer, Hwange Colliery Company Ltd, tumbled 15 percent to US3,50c.
Some market watchers, however, forecast that a recovery is imminent.
“Recovery will happen soon as interest rates have also gone down,” said an analyst with Imara Edwards Securities, who refused to be identified as he is not authorised to speak to the Press.
When interest rates fall, the stock market tends to rise, as capital is redirected from fixed-term investments on the money market.
Conversely, if rates increase, shares decline. But not everyone holds the optimism.
An analyst with IH Securities discounted the impact that the rate cut would have on stocks on the basis that “banks were generally lending in those ranges anyway.”
“To be honest, we have been caught up by the general negative sentiment in emerging markets globally, which are trading at multi-year lows due to slowdown in Chinese growth, low commodity prices and US dollar strength.
“Most African markets and currencies have performed poorly this year,” said the analyst.
The Chinese government was last month forced to intervene with a US$450 billion stimulus to stop the stock market’s crash, which cost investors there US$4 trillion of value in just three weeks of trade.
Economic growth in China, the world’s second biggest economy and biggest consumer of many mineral-based raw materials, mostly from Africa, has fallen below 10 percent this year for the first time in 40 years.
Fears that the Chinese economy will continue slowing down have ripped through major and emerging markets the world over.
In Africa, markets are in a tailspin.
Egyptian stocks have crashed 17 percent year-to-date, Nigeria 13 percent and Kenya 7 percent.
The Lusaka Stock Exchange fell 5 percent and Namibia Stock Exchange dipped 3,1 percent.
