ZSE Watch: The return of the bears

AFTER a mini rally in the period preceding July 7, bears have returned to the Zimbabwe Stock Exchange as investors remain worried about the uncertainty of future economic growth.

Market watchers say stocks are likely to continue drifting sideways until the end of the year on weaker economic growth, continued liquidity shortages and an unsatisfactory performance from industry.

By close of trade on Thursday, the mainstream industrial index was down 1,3 percent at 184,95 points from 187,44 points recorded at the close of trade on July 4.

Industrials fell 0,4 percent in the week ended July 11 and 0,5 percent in the week to July 18. The minings index has however grown markedly since May; supported by double-digit growth in nickel producer, Bindura.

After trades on Thursday, the index was up 11,8 percent at 61,13 points from July 11’s closing of 54,56 points, again lifted by Bindura Nickel Corporation which recently reported a US$13 million profit for the half-year to June, effectively reversing losses from previous years.

BNC closed 4,4 percent higher at US5,01c on Thursday trading as investors continue cheering the firm’s growth plans. The stock is up more than 100 percent since January. Minings rose 4,8 percent in the week ending July 11, recovering from a 11,5 percent slump a week earlier.

Bargain hunters are now profiting from the discounted prices on the bourse. The volume of shares traded on the market doubled to above 32 million in the week to July 18 from the previous week.

Also, weekly turnover rose by over US$1 million to US$5,3 million. Last week, average daily turnover fell below US$1 million. Turnover slumped 48 percent on Thursday to just US$463 000. Of the index shares Thursday, heavyweight counters led the decline.

Econet dropped 1,4 percent to US73c after reports that the telecommunications giant faced investigations for alleged tax fraud dating back 16 years.

Delta, which has largely traded unchanged in the past fortnight, dropped an insignificant US0,01c to US125c after reporting on July 22 that revenue in the quarter to June declined three percent on lower lager sales.

The country’s biggest beverage-maker said sales of premium-priced clear beer fell 21 percent. But sales for sorghum-based beer climbed 15 percent.

Delta reported an overall volume increase of just one percent, blaming the poor results on weaker consumer expenditure.

Sugar producer Hippo Valley lost 7,1 percent, Meikles shed 5,5 percent and TA Holdings closed 9,1 percent lower.

The decline in equities seen during most of the first half has been blamed on poor economic performance and crippling liquidity shortages.

In their weekly equities review, MMC Capital noted that the weak economic outlook was a drawback to the stock market performance.

“We maintain our view that the weak economic fundamentals in Zimbabwe will continue to be the major risk impacting negatively on the upside potential of the bourse,” said the stockbrokers. The country is experiencing a slowdown in consumer spending, depressed mineral output, stagnation in money supply growth and tight revenue collections, the stockbrokers argue.

“But this is the ideal moment for long term buys where investors could cash in on the lower share prices. The current environment however, presents a good opportunity for long term equity players as the majority of stocks are heavily discounted,” said MMC.