Researchers call for shift to real assets, equities
HARARE-BASED economic research firm Akribos Research Institute (Akribos) has advised investors to place their bets on real assets including equities in the face of volatility and high inflation.
Reviewing the new macroeconomic measures announced by President Emmerson Mnangagwa on Saturday, Akribos said in an inflationary environment, real assets including equities would help investors preserve value.
“We recommend investors execute tactical asset allocation strategies that are biased towards real estate, private equity and listed equities and reduce exposure to fixed income and money market instruments,” Akribos said.
“We continue to recommend a buy on consumer staples, information communication technology, construction, agriculture and mining stocks as they remain key focus areas for government spending and consumer demand, “added Akribos.
Focus on real estate comes after billionaire property market investor Ken Sharpe in January projected a boom in 2022 underpinned by steeper demand for spacious accommodation on the domestic market and elsewhere, as people readjust their living patterns in the face of the COVID-19 pandemic.
“Generally, if you look around the world with what's happening today, in several markets outside of Zimbabwe and Africa, we have seen a trend whereby there has been a rise in property prices anywhere from 10% to 30% over the past two years. People do not want to live in confined spaces anymore.
“A lot of the smaller spaces people used to live in are no longer acceptable because of what happened during the pandemic. People wanted to get outdoors. They need balconies, they need yards and so people have definitely moved up in terms of investing in property. So, I project that the future (in the next) 12 to 13 months is going to be a bull run,” Sharpe said at the time.
Akribos said the discrepancy that still exists between the interbank rate and the parallel rate will continue to encourage arbitrage and speculative behaviour in the general economy.
“The potency of this policy measure now rests on the convergence of the two rates (i.e., the interbank rate and parallel rate) in our view,” Akribos said.
The research unit said suspension of lending by banks with immediate effect will cripple banks' core business as financial intermediaries. The policy measure, Akribos argued, will limit the ability of banks to create assets through lending and earning interest income and also suffocate the private sector as it starves firms' working capital for production purposes.
The research firm also said the move will hinder individual households from accessing credit to fund their current consumption, hence reducing aggregate demand in the general economy.
“In our view this policy measure is counterproductive, and it will affect the growth in national output.”
Akribos said government, which added transaction taxes on foreign currency transactions, needs to come up with incentives in the form of attractive savings rates to lure depositors to keep their forex in the financial sector.
“The policymakers need to create an environment that encourages the use of banking channels rather than shunning them and this move might result in the avoidance of the banking system by economic agents especially small to medium enterprises,” it said.