The Sunday Mail
STOCK market analysts forecast that the Zimbabwe Stock Exchange (ZSE) will continue trekking south in the first quarter of 2015 weighed by the bearish economic outlook, making it difficult for stocks to reverse a 19 percent decline recorded last year.
The muted industrial performance is expected to continue dragging the market in the negative territory.
The Confederation of Zimbabwe Industries (CZI) manufacturing report of 2014 showed that capacity utilisation declined to 36,3 percent last year from 39,4 percent recorded a year earlier dragged by waning consumer demand, pressure from imports, working capital constraints, antiquated plant and machinery and inflexible labour laws. In the five trading days from January 2 this year, the mainstream industrial index had dropped 1,21 percent with almost 50 percent of the listed firms experiencing no trades.
Stocks such as Zeco have been out of favour with investors for a quite a long time.
Market watchers believe that the trend will likely continue in the absence of key investments and capital injections into the economy that may spur the local bourse.
It is estimated that the industrial index may plunge to as low as 150 points in the first quarter.
The mining index closed Wednesday’s trade 6,19 percent weaker from the January 2 figures of 72,61 points, reversing the gains of 2014 where it hit a year-on-year high of 105 points buoyed by nickel producer Bindura.
Bindura was the best performer in 2014, gaining over 200 percent.
A socio-economic outlook report released by Econometer Global Capital last week forecasts that listed firms are likely to report depressed earnings in the financial year.
The usual market movers are, however, expected to set the tone and direction of the ZSE because of their solid portfolios.
But the listing drought will persist on the back of poor economic performance, inflationary pressures and weakening of the South African rand.
South Africa is Zimbabwe’s biggest trading partner.
The report further envisages that “blue chip stocks such as Delta, Econet, PPC, BAT, Hippo and OK Zimbabwe to dictate pace of trading activity on the local bourse.
“These counters will offer defensive qualities that can limit the downward risk of equity portfolios.”
A survey conducted by the research unit also noted that there is general pessimism about the direction the economy will take this year.
For every five Zimbabweans interviewed, four believed the economy would worsen this year.
However, the church has become the source of hope in the face of unemployment and high cost of living.
“58 percent of those attending modern day churches believe God can extricate them out of high poverty levels in the country without worrying about the prevailing economic conditions while 18 percent seek positive reinforcement in the midst of political animosity within Zimbabwe, church gives them hope,” reads part of the report.
But there is a ray of hope from the agriculture side where maize, tobacco, horticulture and dairy are expected to contribute significantly to the economy compared to last year.
