ECONET Wireless tops the list of counters to watch on the resurgent Zimbabwe Stock Exchange (ZSE) with market analysts saying investors can expect a healthy return as the firm expands network capacity in order to connect more users.
The telecoms company which dominates the country’s mobile phone sector is one of the ZSE’s heavy hitters with market capitalisation topping US$800 million while the stock presently trades at about US$5.00.
With a subscriber base in excess of 3 million users which translates to about 60 percent of the local market, Econet was also the first listed company to declare dividends in the dollarised economy.
Kingdom Financial Holdings analysts have named the counter is their top pick on the ZSE for the first quarter of the year followed by gold and diamond miner Rio Zim which should benefit from firm world market prices and a complementary domestic policy environment.
Delta Beverages comes in at third place buoyed by an anticipated rise in disposable incomes which could boost alcohol and other beverages consumption.
In the financial services sector CBZ, with a strong deposit base of around 25 percent is easily Zimbabwe’s biggest financial institution and analysts expect the banking group to be the fourth best performer on the ZSE benefiting from the ongoing economic recovery in the country.
Kingdom analysts also said the level of foreign investor participation on the local bourse should continue to increase, especially after the reduction of transaction costs by treasury.
“One of the major highlights on the stock market in 2009 was the level of foreign investor participation soon after the introduction of US dollar trading on the local bourse.
“In October 2008, ZSE Chief Executive, Emmanuel Munyukwi, indicated that foreigners at that time comprised only 2 percent of the funds invested on the ZSE compared with 30 percent in 1997.
“Thus during the hyper-inflationary period prior to 2009, the stock market was mainly driven by local investors. This situation was completely reversed by the introduction of multiple currencies in January 2009 that instantly stabilised the economy especially with respect to inflation and exchange rates,” Kingdom said in its 2010 first quarter market outlook.
The transition to a hard-currency economy, complemented by the positive developments on the political front has seen foreign investor participation on the bourse increase.
“Figures for the second half of 2009 show that, on average, 40 percent of the funds invested on the ZSE belonged to foreigners. The rise in participation by foreign investors … was enhanced by the fact that local investors were constrained by lack of investment funds arising from tight liquidity situation in the economy.
“Furthermore, the resurrection of alternative markets such as the foreign currency and money markets further dampened activity by local investors on the stock market. Foreign investment participation could have been more had it not been for the high transactions cost that rendered the market illiquid,” the Kingdom report said.
Other counters to watch outside the top four include National Foods, construction firm Murray and Roberts, OK Zimbabwe, Barclays Bank and Old Mutual.
Kingdom says investors should target cash generating firms as well as those increasing capacity utilisation.
“Exposure … should be in companies whose capacity utilization is commendably improving, cash generating companies with high growth potential and aggressively and expertly managed companies that would be able to expand their market share under the obtaining macroeconomic conditions.
“The stock market still presents scope for investment opportunities for the long term investors and opportunities to switch from expensive to cheaper stocks,” the analysts said.