FBC sees spinoffs out of capital markets downturn

CAPITAL markets advisory firm, FBC Securities says it sees positive spinoffs from the current bearish market on the Zimbabwe Stock Exchange (ZSE) if investors make strategic decisions.

In an assessment of November capital markets trends, FBC Securities on Tuesday said that the downturn presented opportunities for investors to buy stocks at discounted prices.

It has been a difficult year for Zimbabwe’s capital markets, which have struggled under a tight liquidity regime after government in May announced tough monetary policy measures to stem volatilities.

The ZSE’s market capitalisation reached $3,5 trillion midApril, before retreating to $1,8 trillion.

“We anticipate a sustained bearish trend to prevail on the market in the short to medium term as a result of the contractionary policies introduced by government,” FBC said.

“Government highlighted intentions to maintain its tight monetary policy stance to keep a grip on inflation and exchange rate movements. The bearish sentiment presents opportunities for portfolio reconstruction and accumulation of quality stocks at discounted prices.

“We believe investors can derive value from companies on the ZSE with diverse business models, inflation hedging capabilities and foreign currency generation capacity,” the report said.

It said prevailing global economic trends required investors to hold positions in counters that are well placed to ride out economic turbulences.

Economies have been battling subdued spending power as central banks unleash tough policy regimes to stem rampaging inflation.

These measures are constraining liquidity on the domestic front, especially following the recent policy rate hike to 200%.

Analysts say this would further tighten the liquidity situation.

“Inflationary pressures remain elevated. We expect prolonged liquidity challenges to continue driving a bearish sentiment on the market. We believe investors can derive value from companies on the ZSE with diverse business models, inflation hedging capabilities and foreign currency generation capacity,” it said.

FBC, however, also said in Zimbabwe, there were positive developments in the economy which presented a better outlook.

“Positive developments in the mining and tourism sectors bode well for local economic performance. We, however, note restrictive factors to growth such as the currency crisis, soaring inflation, liquidity constraints, policy missteps and perennial power shortages.

“We also note the upward revision of interest rates, increasing the cost of borrowing, as a limiting factor to desired growth projections as it weighs down aggregate demand.” FBC Securities noted.