[2008-02-11]  Investors return as ZSE liquidity flows improve
INVESTORS began the march back to the Zimbabwe Stock Exchange last week, ending many weeks of losses, as interest rates on the money market fell on improved liquidity conditions.

At close of trade on Friday, the main industrial index recovered 4 percent, or 57 502 355,03 points, to 1 685 199 936,71 points after hitting new lows at midweek. Minings closed fractionally up 5 089 322,26 points at 1 457 768 805,24 points after gains in Bindura and Halogen.

Average ZSE daily turnover climbed 20 percent to $6,67 trillion, up from as low as $4 trillion at week opening.

ZSE statistics show that at close of trades on Thursday, total market capitalisation dropped 1,1 percent to $21 214 trillion, significantly lower from positions of $25 000 trillion posted in the previous period.

On a year-to-date basis, industrials have slumped 12 percent from December 2007 closing levels of 1 911 538 281, 84 points while minings have dropped 38 percent from 2 363 257 849,25 points last year.

In Thursday trading, the main index gained 1 percent, as similar weak gains were reported on the mining index.

This was some marginal recovery from weight losses of 16 percent seen on the key index on Wednesday, and losses of 9 percent on the resource index.

In a volatile week, the market opened up 5 percent on Monday but fell 3,14 percent on Tuesday. At week opening, minings rose 1,1 percent but sank 4,09 percent the following day.

On the day, stocks crumbled under weak sentiment, but the thin volume witnessed suggested investors were holding back positions.

The equities market has come under severe selling pressure in the last three weeks betrayed by a variety of factors that included firmer deposit rates, failure of the Real Time Gross Settlement system, plus generally low institutional investor interest in stocks.

Falling short-term interest rates on the money market also helped the stock market gain last week.

Rates on seven-day or 14-day instruments fell to around 200 percent from high as 600 percent in recent weeks, as liquidity conditions improved.

Deficit positions on the money market improved to around $16 trillion late in the week from nearly $100 trillion previously.

Of the index shares on Friday, several counters gained, but only marginally. Old Mutual lost $1 million and other losses were very minimal.

However, some investors started buying back into the stock market and institutional investors are expected to come in big time soon.

The short-term prediction for the stock market remains upside, particularly in view of high inflation, sitting at 26 000 percent at the end of November.

As inflationary pressures continue to mount, the stock market remains one of the best alternative investment vehicles in the financial markets that can keep pace with inflation.

Annual inflation, sitting at 8 000 percent at the end of September, is estimated to close 2008 at 1 978 percent, according to estimates by Finance Minister Dr Samuel Mumbengegwi.

The negative inflation projections will, thus, play into the hands of the stock market. Current weaknesses in equity prices must, therefore, be looked at as short-term.

Most investors are now taking positions in anticipation of a bull run likely to come in the immediate post-holidays period.

Source: (C)copyright 2008 The Herald ltd.