Massive losses on ZSE

HARARE - The Zimbabwe Stock Exchange (ZSE)’s market capitalisation slumped by $642,8 million to $4,56 billion in the first quarter of 2014 as stock prices plummeted, a latest market report reveals.

In the report, financial group AfraAsia Holdings Zimbabwe Limited (AfrAsia) said the slackening economic growth and disappointing 2013 companies’ performance earnings contributed to weakening stock prices across the board.

“The equities market has also been affected by delistings and suspensions which peaked in 2013 as companies faced mounting viability challenges,” said the report.

The bourse’s mainstream index closed the quarter 12,76 percent lower at 176,32 points whilst the resource index dropped 35,55 percent to 29,51 points — the lowest since 2009.

AfrAsia noted that the stock market took a knock soon after the July 31, 2013 and since then has struggled to find traction.

Following the polls, the bourse lost nearly $1 billion in a week with market capitalisation plunging 15,68 percent to $5 billion from $5,96 billion.

“Overall turnover for the quarter was down eight percent to $118,7 million from the previous quarter turnover of $128,8 million as foreign investors buying declined by four percent to $79,4 million from $82,7 million,” AfrAsia said.

Net buying — foreign buys less foreign sales, increased to $32 million during the quarter from $14, 8 million as at December 31, 2014.

Foreign buying as a ratio of total turnover also went up to 67 percent in the first quarter of this year from 64 percent in the last quarter of 2013.

“The continued support by foreign investors on the ZSE is coming from the continued use of the multi-currency regime and the potential upside on selected stocks,” AfrAsia said, adding that foreigners targeted bellwether stocks like Delta, Econet and Innscor with relatively strong earnings, cash flows and balance sheets.

Small and medium capitalised stocks dominated the movers during the period under review.

Market watchers say the ZSE is sliding, driving equity prices lower across the board amid a punishing economic slowdown characterised by a biting liquidity crunch.

They warn that the stock market will continue falling, wiping out millions off the value of Zimbabwean companies.

“The market continues to trend southwards. Slowdown in economic performance has in turn started impacting negatively on companies’ performance.

“The ongoing reporting season has failed to stimulate activity on the bourse. Companies’ earnings are either flat or below 2013 levels. Delta, BAT and Innscor are few examples. 2014 is going to be difficult and small ailing companies are likely to close shop,” said an analyst with a local bank.

The bankrupt government, devoid of any reserves, has failed to salvage the situation because it has not injected fresh capital to halt the slide as investors take fright at the economic slowdown and the indigenisation policy.

The market traditionally rallies ahead of the reporting period, which began last month for companies releasing December 31 financials.

Instead, the market has been bearish in 2014 as investors remain sceptical and so far listed companies have posted depressed unimpressive results.

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