The equities market will this year remain the preferred investment option in Zimbabwe as investors continue to hedge themselves against potential economic volatility.
Last year, the Zimbabwe Stock Exchange (ZSE) experienced its best performance since dollarisation, pushed by sustained demand as local investors flocked the stock market on high inflation fears.
In addition to this, money market investments lost their attractiveness after monetary authorities capped interest rates, resulting in ballooning bank balances that could only be channelled towards the stock market.
Market watchers contend the economic conditions that prevailed last year persist although there is positive impetus following the change in the country’s leadership after military intervention last November.
Equities analysts say the economic pressures volatility that drove the market rally last year are still apparent, among them ballooning bank balances, foreign currency and cash shortages as well as multiple pricing in the economy. This comes on the back of currency disparities albeit a thriving black market.
It is in light of this that the equities market will remain a preferred option for investors seeking to cushion themselves against the economic volatilities while the liquidity that is finding its way into the economy will continue to keep the stock market on a positive trajectory.
However, investors will continue to cherry pick as they look for companies that have a strong capital base and sustainable business models.
These will mainly drive the stock market, while focus on revival of agriculture, which is the mainstay of the economy, is expected to drive growth. This will cascade to other sectors.
The usual blue chip firms will remain investors’ favourites in the year and continue to drive the market although there are some mid-tiers that have been making significant efforts to restructure their profiles and is therefore anticipated to deliver strong performances.
Among the top picks are Delta, BAT, Econet, National Foods, Innscor, SeedCo, Old Mutual, Padenga and PPC.
The current cash challenges being experienced have led to an increase in the use of plastic money for transacting.
This is expected to drive performance of stocks such as retail giant OK Zimbabwe, which has already shown strong performance on restructuring.
There is a strong focus on agriculture, especially maize, making the country’s biggest seed manufacturer SeedCo an attractive stock, while agri-processing firm, National Foods is expected to enjoy a strong performance in the year riding on last year’s good harvest.
One of the counters to drive the stock market is cigarette manufacturer, British American Tobacco (BAT).
The firm, which has been one of the market’s favourites is expected to continue riding on its consistent dividend policy which is also reflective of its strong hold on the market. BAT has remained the local bourse’s most expensive stock, trading at $35.
The market’s most capitalised stock, Delta, is expected to see a rebound this year following declines in both revenues and profitability, as customers down trade.
The beverages maker also recently acquired a stake in National Brewery Zambia (Natbrew) in a transaction that should be concluded by March this year as the firm consolidates its position as a multi-beverages maker in the region.
Crocodile breeder, Padenga, whose business is export oriented, is anticipated to continue riding on its business model, while also enjoying the benefits of the 5 percent export incentive.
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