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ZSE recovers, but analysts say it’s temporary
29/10/2014 00:00:00
by Business Reporter
 
 
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THE Zimbabwe Stock Exchange (ZSE) which plummeted to a three months’ low last week with the industrial index shedding 5,87 points to 182,9 points clawed back lost ground on Wednesday after trading in the red for ten consecutive days.

Analysts however, analysts see Wednesday’s “positive” as temporary.

The recent decline had been attributed to absence of positive news that could stimulate growth as cracks continue to emerge in the ruling Zanu PF party with policy makers more concerned about their political survival, leaving the economy on auto pilot.

The bearish trend has also been worsened by the miniscule funding that is available on the market and intense money market illiquidity.

After weeks of retreating, the ZSE nudged forward in Wednesday’s trades which saw the Industrial Index recovering by 0.55 points or 0.30 percent to close at 180.95. Overall 1,3 million shares were traded at a total value of US$640,163. 

A number of counters traded in positive territory led by trades in SeedCo which contributed 64 percent to the total value of trades.

Last week’s losses came on the back of negative trades in all the top ten heavy weight counters. The weekly turnover declined 27 percent to US$3,7 million, with Econet, Innscor and Delta contributing 76 percent.

Simillarly, the mining index retreated by 6,88 points to 74, 88 points, weighed down by losses in Bindura and Rio Zim.

The previous week the market had been on a free fall, with the benchmark index losing 0,37 points to end at 188,77 points. Week-on-week, the mining index dropped a significant 5,41 points to 81,76 points.

One of the few things for certain about the stock market is that it will go up and down, however in Zimbabwe it appears no one has a clear idea when either of these events is going to happen.

Stockbrokers say the strategy of long-term investing will protect one’s investment during those times when the stock market is going down, creating the opportunity for growth when the market is going up.

Analysts say because bear markets are invariably followed by bull markets, and it was important to raise cash and keep a handy wish list of stocks with target prices to buy, before a bull market begins.

Bull markets tend to begin abruptly when things appear gloomiest; prices will be on a free fall, with no light at the end of the tunnel.



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“When fear, pessimism and pain reach their maximum, a bottom is reached, and a bull market begins,” said one analyst.

It is important that the market corrects itself and operate based on fundamentals and this way the country can have a market that is operating in a sustainable manner.

But what does this mean to investors, the ordinary man on the street, potential investors, and the economy?

“When everyone wants to buy, sell all the lower quality and cyclical stocks, if you have not already.

“Hold onto the highest quality defensive stocks if you are a long term investor … if the worst happens, your investment would not be wiped out completely,” said a stockbroker this week.

The unfortunate reality of investing in the stock market is living through the inevitable commotion that occurs when the market takes a deep dive.

Nothing chills the bones like watching the market take a tumble, because every investor will wonder when it will bounce back.

“Ask any stockbroker what happens when the market takes a nosedive and almost every one of them will tell you that their phone will not stop ringing from clients who want to cash out of the stock market.

“These are the same clients the broker has convinced to adopt a strategy of buying great companies at great prices and holding them while they create wealth,” said one analyst.


 
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