The Sunday Mail
THE performance of local stocks is expected to remain muted as the economic environment is likely to remain shackled by liquidity challenges and poor earnings results, market watchers say.
The Zimbabwe Stock Exchange plunged 20 percent last year, the worst performance among Africa’s top ten markets, and investors lost more than US$600 million as the bourse retreated.
Stockbrokers MMC Capital forecast more of the same in 2015.
It is believed that GDP growth below 1 percent, negative inflation, poor consumer demand and low industrial capacity could hurt investment equities.
Government and the World Bank, however, estimate the local economy will grow by 3,2 percent this year.
“Most investors are still waiting for a clear guidance on key investor friendly related policies such as the indigenisation policy. Our view is that the market will likely remain under pressure,” said MMC Capital in their 2015 outlook.
But stocks with “solid operating fundamentals, foreign markets exposure and high cash generating ability” such as Delta Corporation and OK Zimbabwe will survive the economic turbulence, according “good buying opportunities for long-term investors,” added the report,
Econet, Barclays, African Sun, Seedco, TSL, Padenga, Natfoods, Bindura Nickel Corporation and Old Mutual are among the top picks.
“Infrastructure is one of the key enablers for any economic revival, and most “mega-deals” such as the ones with China and Russia, if implemented, will inevitably involve a lot of construction activity and infrastructure development.
Despite the economy being in such dire straits, we are still witnessing a lot of construction activity.”
Deflation will continue haunting the economy, the report said, due to depressed domestic demand and a weaker South African rand. The South African rand dropped to 11,07 against the US dollar during the second half of 2014.
South Africa is Zimbabwe’s biggest trading partner.
“Periods of deflation mostly lead to economic stagnation and high unemployment.
“Pursuing structural reforms that reduce the saving- investment gap, such as recapitalising banks to better equip them finance bigger projects within different sectors of the economy remain key. We project an average inflation rate of zero percent in 2015,” said MMC Capital.
Last week, the country’s biggest company by market capitalisation, Delta, reported a marked decline in both revenue and volumes dragged by low consumer spending.
The 2014 Confederation of Zimbabwe Industries Manufacturing Sector Survey revealed capacity utilisation shed 3,3 percentage points last year to 36,3 percent. Analysts say there is potential for growth.
Statistics from the Reserve Bank of Zimbabwe show that average FDI for Zimbabwe between 2002 and 2012 was US$88 million compared to US$800 million for Zambia.
Mozambique received US$586 million while Botswana had US$486 million in the review period.
Although some analysts are bullish on this year’s economic growth prospects, there are generally fears that the lingering fears surrounding the Ebola virus outbreak in West Africa will continue to affect investments.
The outbreak, which mainly affected Liberia, Sierra Leone and Guinea, has put a stain on the image of the continent, with tourism the biggest casualty.
