ZSE weekly review

Published: 15 August 2013

The industrial index lost a massive 15.2% on the back of a land slide victory by Zanu-PF in the just ended harmonised election. The market reacted unfavorably to the news as the investing public digests the post election government to ascertain direction in the foreseeable future. In this state of frenzied panic, stocks lost heavily as investors exited fueled by the uncertainties. Huge losses were recorded in Masimba (-41%), Afdis (-33%), NMB (30%), Truworths (25%) and Barclays (23%). The major rises were driven by penny stocks such as Phoenix (+67%), CAFCA (+18%), Hunyani (+17%) and African Sun (+10%). The mining index was not spared the blood bath shedding a hefty 13% on the back of thin trades in Hwange (-43%) and Falgold down 33%. Overall trading volumes increased 206% to USD 15.1m with foreign sales jumping by 413% to close the week at USD 10m. During the week there was net foreign divesture from the ZSE amounting to USD 1.5m.

On the political front the market seem to be looking forward to new government to be instituted by early to mid September 2013. Key appointments in the ministries of Finance, Commerce, Mining as well as Indigenisation and Economic Empowerment will highlight the policy direction for the next five years. Our view, is that pro-business appointments will likely drive economic growth and instill confidence in the business community; however hardliners are likely to alienate the business sector. One of the most important decisions the Minister of Finance and his/her advisors must make is to assure the country at large that the multicurrency regime will continue at least for the next five years if it's possible. Without such an assurance we are likely to witness a run on banks resulting in the money circulating outside of the banking system increasing. In addition most banks will be reluctant to advance credit. Although it may be too early to read into anything at the present moment, we remain cautiously optimistic that the right decisions will be made.

To the contrarian investor the political noise represent a good entry level in some stocks which has been over punished in the past week. Fundamentals for stock such as Delta, Econet and Innscor remains strong irrespective the current politically induced sell off.

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Imara Edwards Securities can be contacted at research.zimbabwe@imara.co

- Imara Edwards Securities