The Sunday Mail
INVESTORS are yet to take positions in counters on the Zimbabwe Stock Exchange in the wake of recent multi-million-dollar deals between Zimbabwe and China and Russia. Analysts say the market will take a cue from company earnings’ reports presently being released.
Stocks have been declining for the past three weeks. Government signed nine landmark deals with Beijing on August 25, 2014 that will see major investments in key energy, roads, the rail and telecommunications infrastructure, as well as in tourism and agriculture.
And on September 16, 2014 Zimbabwe, which holds the world’s second-largest known platinum reserves, and Russia jointly commissioned a US$4,8 billion Darwendale platinum project. The venture is expected to produce 800 000 ounces a year with an estimated life of 20 years.
Economists agree that infrastructure projects generally stimulate the economy as the inherent scope of works that are involved naturally have a multiplier effect.
But since September 5, the ZSE’s mainstream industrial index lost 3,2 percent to 194,57 points at the close of trading on Thursday from a high of 201 points.
The mining index, which consists of the Hwange, Bindura, RioZim and Falgold counters, dropped 2,8 percent to 96,27 points on Thursday from 101 points three weeks earlier.
Losses in big counters Delta, Econet, Innscor, National Foods and SeedCo have driven the market lower.
In the past fortnight, Delta fell USc6 from USc135, while mobile network provider Econet shed USc7 from a high of USc84. Market watchers believe stocks will begin positively recting once the deals start having a material effect on the economy. Stocks involved in civil works, construction and strategic raw material manufacture are among those tipped to benefit.
Stockbrokers FBC Securities’ equities and alternative investments analyst Mr Albert Norumedzo said the deals had coincided with the release of company earnings results, which were more reflective of the prevailing economic environment.
“There is no real money injected into the economy yet, those deals are still promises and not enough to stir the market,” said Mr Norumedzo.
Both heavily capitalised and low-tier stocks have been reporting declining earnings as the liquidity crunch continues to take its toll.
Companies continue to be affected by liquidity challenges, weak consumer spending and low production.
Econometer Global Capital head of research Mr Takunda Mugaga said the economy needed serious tangible portfolio investments to spur other investors to inject capital.
“The stock market has been disappointing; world-over stocks respond to market dynamics, but ours has developed a ‘thick skin’. But it will respond to substantial deals that are tangible,” he said.
