The Sunday Mail
MARKET WATCHERS say the injection of fresh liquidity through bond notes is unlikely to influence trading on the Zimbabwe Stock Exchange, which has generally struggled since 2014.
Stocks have dropped 50 percent in the past two years as foreign investors exit developing economies.
Foreign investors, who account for two-thirds of ZSE trades, are channelling their investments into US assets, especially after the recent rate hike by the US federal reserve.
The Reserve Bank of Zimbabwe plans to introduce bond notes to ease cash shortages and to prevent externalisation.
The bond notes will be underwritten by a US$200 million loan from Cairo-based lender the Africa Export-Import Bank.
Analysts, however, say fresh liquidity will likely spur consumer and export-oriented stocks such as Delta Corporation, OK Zimbabwe, TSL Ltd, BAT Ltd, Dairibord and Padenga.
Of late, revenues generated by consumer stocks have been declining owing to softening demand and an illiquid market. Consumers are largely shifting preferences from luxury goods to basic commodities.
Economist Dr Gift Mugano contends injection of money into the economy naturally enhanced liquidity and ultimately demand for consumer goods.
Export-oriented stocks also naturally gain if there is an increase in exports.
“This can only happen if and only if it is hard money not bond notes.
“With the coming in of bond notes, as expected, we have already witnessed reduction in the circulation of cash due to a number of factors such as disruptions in electronic transfers, ZimSwitch and reduction in the withdrawal limits all of which have a combined effect of reducing in demand for consumer goods,” said Dr Mugano.
“The question we need to address here is if the five percent export incentives promised by the Central Bank will incentivise firms to export more?”
The ability of local companies to compete has mainly been affected by poor infrastructure and a general lack of competitiveness, which has been worsened by a strengthening US dollar, the main unit of exchange.
Dr Mugano indicated that there was need to address factors that influence competitiveness.
“The reality on the ground is that the bond notes have brought anxiety, as expected,” added Dr Mugano.
Equities analyst Ms Noreen Gororo said while capital injection could encourage activity in export-oriented stocks, overall performance remained a function of growth in the markets they supplied.
“In isolation, it is not likely to breathe life into the local capital market, other issues like overall economic performance and outlook have greater influence on market performance.
“It is a wait-and-see scenario. Market acceptance of the scheme is of importance. As far as improving market liquidity, $200 million might not have a major impact.
“Liquidity on capital markets is also a function of available demand which is mainly derived from the profile of available capital market participants,” she said.
Last week, stocks across Africa see-sawed prior to Africa Day celebrations on May 25.
The African Development Bank recently forecast economic growth in Sub-Saharan Africa would average 4,5 percent in 2017 on the back of an expected sustained recovery in commodities.
The Nigeria Stock Exchange All-Share Index recovered by a marginal 0,1 percent to 27 129,41 points.
In Namibia and Zambia, shares improved 0,3 percent and 0,1 percent, respectively, as mining tax changes are expected to “strike the right balance in the copper-rich country”.
The continent’s biggest bourse the Johannesburg Stock Exchange’s top 40 index eased 1,12 percent.
The ZSE retreated 0,7 percent to 105,10 points in the opening session before a 0,13 percent recovery in the pre-holiday session.
The rebound was supported by gains in Econet Wireless Zimbabwe, which advanced 3,7 percent to USc22,42, and Seedco, which rose 0,3 percent to USc57,14.
But the market gains were held back by losses in Colcom that came off 3,13 percent to USc15,5, while insurance group Fidelity lost one percent to USc10,3.
Delta tanked 0,1 percent to USc71,75 in pre-holiday trading.
The mining index rose gained 1,4 percent to 25,54 points after RioZim rose 2,9 percent to USc22,42.
