The Sunday Mail
WATCHERS say the stock market remains a meaningful investment destination as the money market largely remains subdued.
A research note by Lynton Edwards Stock Brokers shows that the Zimbabwe Stock Exchange ended the first half of 2014 down 7,7 percent at 186,56 points.
Most regional stock exchanges, however, recorded gains; with Malawi topping – up 16,4 percent year-to-date.
The report indicates that Delta Corporation accounted for the bulk of market turnover, with US$66,7 million of the total invested funds on the bourse.
Cottco shed more than 87 percent from its opening share price.
The mining index recorded major gains, led by by Bindura Nickel Corporation 350 percent rise to USc9 year-to-date. BNC’s surge has been buoyed by spiralling international nickel prices and increased throughput at Trojan Mine.
June was the best performing month for the ZSE, recording gains in 15 trading sessions and losses in just six.
The biggest weekly gain was also recorded in June after the main Industrials Index gained 3,7 percent for the week ending June 20, 2014, compared to the market’s biggest one-day gain of 1,78 percent on April 23.
On the other hand, March was the worst month for equities after the ZSE closed in the red in 17 trading sessions. By the end of March, the main Industrials Index had lost 6,9 percent, one of the biggest monthly losses.
The 1,97 percent loss on January 28, was the first half’s biggest one day loss.
Notwithstanding macro-economic considerations, Lynton Edwards believes the equities market remains the only meaning investment option.
The money market, where financial instruments with high liquidity and very short maturities are traded, is being throttled by cash shortages.
Usually, the money market is used by participants as a means for borrowing and lending in the short-term, from several days to just under a year.
“Despite the expected subdued economic outlook, we believe the equities market will be the country’s preferred choice for investments. Lending support to this is the fact that investment alternatives are limited, with no fixed income market to talk about.
“Therefore, we project a base case return of 10 percent for the ZSE, which will largely be driven by some of our stock picks,” said Lynton Edwards in its half-year report.
The stock brokers added that the equities’ future is bright.
Lynton Edwards said equity prices reflected the current value of presumptive future cashflows.
“Furthermore, the apparent disconnect between high absolute equity prices and low economic growth expectations must not distract investors from a more critical consideration: the current market price of future cash flows.
“Yes, considerable uncertainty remains. Policy uncertainty and the huge debt overhang could conspire to keep a lid on economic growth.
“Yet we believe there are reasons for optimism too.
“Even if national economic growth disappoints, stocks need not necessarily do the same. Investors will continue to find stocks that are priced low in relation to what they are worth,” reads part of the report.
During the first half of the year several listed companies reported disappointing results.
These include Delta, Econet, Innscor, National Foods, OK Zimbabwe, TSL, BAT, Hippo, Meikles and Seed-Co.
Of these, however, TSL, National Foods and Seed-Co recorded strong revenue growth.
Turnover for the period at US$234,4 million was higher than the US$222,5 million recorded in the prior year. Delta and Econet received the bulk with US$66,7 million and US$50,1 million respectively.
Seed-Co was third with US$4,3 million mainly due to transactions related to the group’s incorporation of strategic equity partner Limagrain.
