Stock market falls 8pc on weak economy

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THE Zimbabwe Stock Exchange (ZSE) fell by nearly eight percent in the first half of the year, because of worsening economic fundamentals and the poor company performance, but still remains the investment vehicle of choice in the country, a leading stockbroker said on Tuesday.
The mainstream industrial index fell by as much as 12 percent in the first quarter, before recovering to current levels. It closed at 187.86 points on Tuesday.
“First quarter trading was choppy, but the 12,6 percent  decline in early 2014 paved the way for stronger performance in the last two months of the period, May and June,” said  Lynton and Edwards Stockbrokers (LES) in its half-yearly report.
“It took a late rally in May and June to reduce the loss to 7,7 percent for the main industrial index.”
The downward trend dominating in the first four months to April was indicative of the malaise in the economy, with June, its best performing month, recording gains in 15 trading sessions, while recording losses in six.
March was the worst month for equities, with losses in 17 trading sessions out of 21.
The biggest weekly gain was recorded in June, after the industrials index gained 3,68 percent for the week ending 20 June 2014.
The market’s biggest one day gain was the 1,78 percent gain recorded on 23 April.
“By the end of March, the industrial index had lost 6,93 percent, one of the biggest monthly losses. The 1.97 percent loss on the 28th of January was the first half’s biggest one day loss,” LES said.
Beverage maker Delta remains the most attractive counter on the bourse, receiving $66.7 million of the total invested funds on the ZSE, while Cottco was the biggest loser, shedding 86.67 percent of its value since the turn of the year.
The ZSE’s market capitalisation was at its highest of $5,253 billion for the half on 14 January while the highest daily turnover was $13,2 million on the 24 April when trades in SeedCo contributed the bulk of the revenues.
The main industrial index was at its year high on 13 January when it reached 204.17 points, while the mining index only reached its year-to-date high of 61.71 points on the 26 June.
LES said weak economic fundamentals, liquidity constrains which resulted in subdued demand and deflation will remain in the short-term.Advertisement

Lack of clarity on indigenisation laws also remained a major concern for foreign investors, while the country’s external debt overhang has become a serious impediment to economic transformation as the country cannot access fresh capital.
However, the equities market was likely to recover by the end of the year, the stockbroking firm said.
“Even if national economic growth disappoints, stocks need not necessarily do the same. Investors will continue to find stocks that are priced low in relation to what they are worth,” it added.