Monday, September 27, 2010

ZSE stocks remain under pressure

THE Zimbabwe Stock Exchange industrial index fell last week as stocks continue to suffer from pressures of tight liquidity and other economic challenges.

The benchmark index lost 1,2 percent compared to week ending 17 September 2010 while the mining index came off 7.10 points, a decline of 4,8 percent to close at 162.41 points.

Weekly turnover amounted to about US$6,6 million from 75 736 306 traded shares.

Econet was the most liquid counter with total weekly revenue of US$1,6 million.

It was followed by Delta at US$1 million, Interfin at 945 997, Innscor at US$426 588 and OK Zimbabwe at US$326 530.

There was a special bargain involving about four million Interfin shares.

The parcel traded at a special bargain price of US24c being 14,29 percent premium to the trading price of US21c.

Market capitalisation declined from US$3 338 646 185 during the week ended September 17 to US$3 302 214 185 implying that aggregate shareholder value lost US$86,4 million.

ZSE stocks are expected to remain under pressure due to liquidity constraints.

In the short term, the money market will continue providing better returns than the equities market.

Although it has been largely anticipated that liquidity could significantly improve after the sale of Chiadzwa diamonds, money supply has remained low and the situation would remain favourable for money market investors.

Analysts say the prevailing trading environment does not encourage a passive investment strategy on the stock market.

Since the beginning of the year, the money market has outperformed the returns from equities market.

As at September 1, the benchmark industrial index had posted a loss of 13 percent whilst the mining index had shed about 31 percent.

However, there is now growing participation by foreign investors.

Foreign trades have significantly improved amid indications that the value of shares bought rose by 309 percent between May and August.

According to statistics from the ZSE, foreigners bought shares worth US$6 612 312,20 in May and the value slightly increased in June to $6 667 649.33.

The purchases by foreigners rose to US$17 727 545,61 in July and in August the value shot up to US$27 203 071.40.

Most foreign traders, whose appetite for risk is generally on the lower end, have shunned the ZSE for other less risky stock exchange due to political uncertainties and lack of clarity on the country’s empowerment laws.

Volumes of trades from foreign investors has therefore remained relatively subdued than expected, a development that has also led to depressed activity on the ZSE.

Analysts said the growing participation by foreigners reflects renewed confidence among foreign investors who had shunned the market as a result of some uncertainties, particularly the country’s indigenisation and empowerment laws.

Elsewhere, US stocks soared in opening trade on Friday, led by Nike’s strong earnings and better than expected manufacturing data as well as a rise in German business confidence.

The Dow Jones Industrial Average jumped 1.5 percent or 158.29 points to 10,820.71 shortly after the opening bell, while the broader S&P 500 index was up 1,4 percent or 15.65 points to 1,140.39 points.

The tech-rich Nasdaq composite index rose 1,36 percent or 32.06 points to 2,359.26.

Nike saw its shares jump by nearly four percent after its quarterly earnings report exceeded expectations with a nine percent rise in net income and an eight percent rise in revenue to US$5.18 billion.
Traders were also digesting data released before the opening bell showing that orders for big-ticket items decreased in August at a slower than expected rate.

Excluding the transportation equipment, mainly aircraft parts, orders of items such as household appliances nevertheless rose by a more-than-expected 2.0 percent.

The manufacturing industry is seen as one of the main engines pulling the US economy out of one of its worst recessions in decades.

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