ZSE weekly review

Published: 06 May 2014

The market maintained its upward flight with the industrial index rising by 1.9% to 173.59 points while the mining index retreated 0.8% to close at 29.64 points. Market performance was mainly driven by gains in heavy weight counters; ABC (+3.57%), Delta (+4.1%), Econet (+1.7%) and Innscor (+2.72%). The total market turnover was boosted by a special bargain of 27m Zimplow shares at 2.75c thus w-o-w turnover closed at $4.8m, some 73.3% below prior week. Volumes traded during the week were 1.1% down from last week. For the week foreigners were net sellers from net buyers for the prior week. Market cap for the week was 11.6% lower at $4.96m.

Zimbabwe's liquidity crunch has been worsening and there seems to be no quick fix solutions to the current problems that are crippling the economy. The touted interbank market facility that was seen as a possible solution to the liquidity crisis is still dormant. Only six banks are reported to have applied to be vetted to access the facility. In our view, the stringent conditions for banks to participate in the interbank market will isolate the needy banks as they do not have the acceptable security. The issue of acceptable security remains a work in progress and the Afreximbank is working with banks on the type of instruments that can be accepted as security and the tradability thereof.

Despite the slowdown in the economic growth, we believe that the ZSE still offers value especially for long term investors. We urge investors to be selective in their stock picks and we recommend exposure to stocks with defensive qualities, dual listings, export oriented and strong balance sheet as they are well positioned to withstand the negative effects of a possible deflation. In our view, companies such as OK Zim, Delta, Seed Co, Padenga, Econet, Old Mutual and PPC offer stability in a portfolio.
- Imara Edwards Securities