Speculation drives ZSE bull-run

BULLS continued to charge on the Zimbabwe Stock Exchange (ZSE) as stocks hit record highs last week on speculative buying, in a throwback to the hyper-inflationary madness of 2008.

In the week to Thursday, total market value had reached $22,9 billion as share prices went haywire. This means the stock market now accounts for 89 percent of the country’s gross domestic product (GDP).

Finance and Economic Development Minister, Professor Mthuli Ncube said the official $18 billion GDP was not reflective of the real size of the economy and rebased it to $25,7 billion.

Government recently announced monetary and fiscal measures aimed at improving the economy in line with Vision 2030.

As part of the broader fiscal stabilization measures, Prof Ncube announced an Intermediary Money Transfer Tax of two (2) cents, which will widen room for capital funding.

The recently launched Transitional Stabilisation Programme (TSP) also speaks to the main challenges that have affected the economy, resulting in low confidence and high speculation. Parallel market rates reacted by skyrocketing. Resultantly, prices of some goods and services went up and stock-outs had become common as hoarding and panic buying gripped the market. This extended to stocks as buying pressure continued with many investors pursuing the stock market route as a hedge against uncertainties.

Last week alone, total market value added $6 billion or rose 37,1 percent to $22,9 billion from previous week’s $13,4 billion.

All indices sailed to new record highs. The Industrials closed the week 0,02 percent shy of the 700 points mark at 699, 86 points.

The ZSE Top 10 Index surged 78 percent to 227 points as heavies continued to lead the surge. At 208,3 points, the ZSE All Share Index jumped 69,1 percent as gains were recorded across the board. The Mining Index also charged 47 percent to 242 level as all its counters but Falgold recorded gains in the week. Insurance giant Old Mutual soared 115 percent to $12,70 while Delta rose 92 percent to $4,36. The beverages giant’s lager beer volumes grew by 52 percent over prior year for the quarter to September 2018, and up 54 percent for the six months on the back of increased demand.

The sorghum beer volume in Zimbabwe grew by 9 percent above prior year for the quarter and 2 percent for the six months and the company recorded an improvement in the supply of packaging materials for Chibuku Super. The production capacity for Chibuku Super is now fully extended while that for standard Chibuku is limited by the shortages of Scud bottles. Biggest stock by market capitalisation, Econet rose 89 percent to $2,93 from prior week’s $1,55.

According to telecoms regulator, the Telecommunications Regulatory Authority of Zimbabwe, the telecoms sector is anticipated to maintain growth going forward on the back of growth in data and mobile money usage, which should enhance Econet.

The country’s biggest retail chain, OK Zimbabwe ticked 68 percent to 44,5 cents. Cigarette manufacturer BAT rose 46 percent to $39,60, remaining the most expensive stock on the market. Other gains were recorded in Innscor, Bindura and Hwange. These rose 72 percent to $2,43; 58 percent to 10,01 cents and 5,9 percent to 4,25 cents respectively.

At Hwange, indications are that the coal producer defaulted on the Scheme of Arrangement it entered into with creditors, and the firm has plunged into $7,6 million arrears due to poor management.

The company, which owes various creditors $352 million, entered into a Scheme of Arrangement with them on May 10 last year, under which employees would be paid monthly. Resultantly, top management, including its acting managing director, were suspended on unethical business practices.

Maintaining prior week’s levels were Nampak that closed pegged at 18 cents while Powerspeed and Willdale closed pegged at 14,99 cents and 0,67 cents respectively.

During the week, Barclays rebranded to First Capital Bank Limited in line with its new owners. The financial institution’s shareholders also approved the unbundling of its non-core banking properties into a separate entity to be listed on the bourse.

The primary asset included is its 50 percent shareholding in a property holding company called Makasa Sun (Private) Limited.The economy has been battling challenges that relate to foreign currency and cash shortages, unsustainable high budget and current account deficits and infrastructure deficiencies, among others.

But it’s not all gloom and doom. The International Monetary Fund (IMF) has reviewed its 2018 Zimbabwe economic growth forecast to 3,6 percent from 2,4 percent it projected in April this year.

Government also estimates the economy will expand 6,3 percent against the initial projection of 4,5 percent.

Prospects are high stemming from the a raft of measures being implemented towards improving the country’s economic fortunes and making it an upper middle class by 2030.