Think beyond ZSE troubles

Published: 25 August 2013

Investing in stocks, money markets, bonds or anything for that matter, is a scary undertaking, especially for first timers. It is more so when the market is going through a bad patch. The stock market and its potential for risk intimidates many faint-hearted people, largely those whose sources of finance are not as wide as deep-pocketed investors.

Despite all its real and perceived challenges, economic commentators are of the view that a well-built stock portfolio - over time - will outperform other investments.

It is possible for an investor to build a stock portfolio on their own, even if they work with a broker. Understanding one's goals as well as the nature of the market will help build a successful investing strategy. The key to positioning oneself to potential good returns in the face of poor equities performance is committing funds over the long term.

While many investors would cherish making "a killing in the market" by raking in a lot of money on a stock in the short term, the sudden gain can be wiped out by an equally sudden loss.

A sustained presence in the market is also more likely to pay over time than trying to make a quick buck.

As part of investing over the long term, it is critical for the investor to determine the amount of money they won't require for about five years or longer and set that aside for investing.

Money that would be needed in the short term should be invested in shorter-term investments so that it is withdrawn when necessary.

It is imperative, therefore, that investors - both existing and potential - should ignore the poor performance of the Zimbabwe Stock Exchange (ZSE).

Trade on the ZSE has been bearish since the landmark July 31 2013 harmonised elections, but market watchers are confident that the trend will subside in the medium term.

For the week ended August 16, the industrial index was 4,1 percent weaker to close at 187.97 points owing to perceived uncertainty arising from the political front.

Cumulatively the index has dropped a significant 20 percent since the official announcement of the election results on August 5 2013.

Thus the year-to-date return for the index has been trimmed down from 51,7 percent at the end of July to a mere 23,3 percent, whilst the overall market capitalisation has declined by US$1,1 billion in the past two and half weeks.

Market breadth for the second week running was dominated by shakers. Last week, 24 counters lost their footing against 13 movers. The other 36 counters traded unchanged at the prior week's levels.

Penny stocks dominated the movers' packs, with Phoenix topping the list after gaining 46 percent to close at US0,73cents. African Sun gained 12,7 percent ahead of the UNWTO general assembly which began last Friday.

Mining stocks on the other hand dominated the shakers' pack as Hwange, Falgold and Bindura were among the worst performers due to the poor international prices of metals.

However, many analysts are confident that the bearish trend on the bourse will end after announcement of the new Cabinet.

As everyone awaits the announcement of a "progressive" Cabinet team, serious investors are advised to stampede for equities while the price is still low.

Tetrad Securities believes the bearish trend will continue but potentially end after the announcement of Cabinet.

"We still maintain our bearish outlook as there are no material changes that have been effected, especially on key economic policies.

"With the swearing-in of the President expected to take place this Thursday (last week), hopefully this will be followed by the swift appointment of Cabinet members and policy announcements that will allay investor fears," said Tetrad in its latest weekly market update.

Meanwhile, we urge investors to always rush to purchase stocks even from counters that have recorded losses or expecting to post losses as that would result in the shareholder reaping more rewards when the market eventually self-corrects.

If the new Government adopts prudent macro-economic policies and satisfactorily implements the Indigenisation and Economic Empowerment Act, which Zanu-PF rode on during the campaign period, the markets will respond positively.

And given that some Western governments have indicated their willingness to work with the winning political party, credit lines are expected to increase.

An increase in the availability of cash would boost confidence in some sceptical investors, resulting in more jobs being created and the economy operating viably.

To stand on the sidelines fearing equities or gold price fluctuations would be a reckless economic decision because every investment vehicle carries its own risk.

Nowhere is change more prevalent and unpredictable than in today's financial markets.

With weekly market turnover improving by 39 percent to US$21 million from US$15 million, mainly lifted by a special bargain of CBZ shares worth US$8,4 million, the future appears bright for the ZSE.

In the clearest indication yet that good times are set to return on the bourse, a Malaysian-based private equity fund is understood to have snapped up more than a tenth of CBZ's issued shares, purchasing 55,67 million shares at a price of US15cents.

CBZ is also reported to have issued a US$10 million convertible debenture that was fully taken up by a foreign investor.

A representative of Augur Investments, the company constructing the Harare Airport Road, Mr Ken Sharpe, last week said it is better for investors to grab available opportunities despite the economic environment obtaining at any moment.

Augur Investments began the Harare Airport Road project during the height of hyperinflation in 2008.
- sundaymail

Tags: ZSE,