Zimbabwe: Volatile ZSE Shares Rebound

Source from:  The Herald (Harare) 17 September 2007 09/18/2007

ZIMBABWE Stock Exchange shares pared midweek losses on Friday with investors buying second-liner stocks viewed by many as cheap. In Friday's trading, the main industrial index recovered 5,2 percent or 3 187 327.08 points to close at 64 177 064.11 points. Stocks had cooled off on Wednesday and Thursday on profit taking dropping 3,10 percent and 7,6 percent respectively to end at 60 989 737.03 points on Thursday. Industrials had touched an all-time high 68 108 881.90 points on Tuesday. Certainly, equities appeared to have over-heated and needed to cool off. Daily gains of between 12 percent and 25 percent were fundamentally unsustainable. The two-day breather, however, seemed to be what it was-breather, as stocks stabilised to regain additional strength and power on Friday. Many analysts predict with weak inflation figures and forecasts, such kind of volatility will become a common feature on the stock market. On Friday, minings extended losses falling 7 percent to 45 716 092.32 points. The index reached a record high of over 56 000 000 points on Tuesday, when it gained over 22,6 percent. Average daily ZSE turnover fell 36,64 percent on Thursday to $381,3 billion while total market capitalisation fell marginally to $765,2 trillion. At peak periods on Tuesday, daily turnover almost breached the $1 trillion mark. There was no major economic news in the week. Many investors digested the September 6 fiscal policy statement, which appeared to have sparked on the lights at the ZSE. The policy remained clueless on strategies being employed to contain runaway inflation, sitting at 7 364 percent at the end of July. Investors have used equities, as a hedge against inflation, and the lack of clear-cut policies to combat this scourge helped stocks trash record levels in the previous fortnight. In fact, the market seemed more worried of the Reserve Bank's pending monetary policy statement, which siphoned out positive sentiment from the market on Wednesday and Thursday. Market rumour remained abuzz RBZ Governor Dr Gideon Gono was due to present his monetary policy last week but nothing of the sort happened, causing unnecessary tension in financial markets. Of the index shares, industrial conglomerate, Innscor Ltd paced advancers Friday rising $16 000 to $100 000 followed by beverage maker, Delta, that finished higher $15 000 at $65 000. TA Holdings surged $10 000 to $170 000, banking group Kingdom firmed $5 000 to $55 000 and Gulliver closed at $20 000, up $3 100. Of the ZSE stocks heavyweights shares fell. Cement producer, PPC led decliners dropping $100 000 to $1 300 000, tobacco processor BAT down $50 000 to $700 000, Afdis lost $6 000 to $44 000. Milk producer Dairibord lost $5 000. Edgars Stores plunged 16,3 percent at $10 000 after the group reported last week it anticipated an operating loss in September due to pricing distortions. The company said July sales had exceeded forecasts but fell sharply in August due to weak stock holdings. The retailer, which has since suspended credit purchases only has 4 weeks of stock cover versus acceptable levels of between 10 and 12 weeks. If right pricing models are not instituted soon, Edgars says it may not be able to restock to adequate levels until only after April next. This is the same situation troubling many ZSE retailers now, price controls and low stock levels. Although Government has allowed prices to rise, some retailers believe the margin of increase is still below equilibrium levels, and as such, restocking will remain a challenge. In Minings, nickel miner Bindura sank 5,6 percent to $170 000 while Rio Zim dragged 12,5 percent at $700 000, as investor took profit after a bullish two weeks. Falgold, Hwange and Halogen traded unchanged. Equity analysts say with negative inflation predictions, the equities rally will continue in the short-term with occasional profit taking, however. Investors remain concerned about Government's pricing policy stance, and such uncertainties may have divergent impact on stock movements. Enditem