[2008-02-07]  ZSE Shares Crumble
Zimbabwe Stock Exchange shares yesterday crumbled under heavy negative sentiment, paring gains reported earlier in the week.

In Wednesday trading, equities appeared geared for further declines this week. On the day, the main industrial index crashed 16,1, percent to 1 611 977 187.82 points, the biggest daily slump inside three weeks of sustained losses.


Minings buried the world commodity prices rally, and lost 8,79 percent to 1 488 786 695.20 points on sector-wide losses. Average ZSE daily turnover fell below $4 trillion and total market capitalisation dipped to below $23 000 trillion from over $25 000 trillion in the week ago period.

On Monday, the main index had opened up 6 percent racing towards the 2 billion-point mark although minings dropped 1 percent.

Tuesday, investors started selling, and took off more than 3 percent on the main index. Minings lost 4,09 percent.

Of the index shares yesterday, only one counter gained -- Pioneer up 100 percent -- four traded unchanged and the rest sank into the red. The explanation for the equities plunge is neither here nor there. But it is sure small investors selling and institutional investors watching from the sidelines.

Volumes were thin yesterday, and money market interest rates started falling, as liquidity conditions improved. Rates on deposits of tenor two weeks or below fell to between 200 percent and 300 percent from over 500 percent previously. With rates low as this, and inflation high as 26 000 percent, very few investors would be seen going the money market route.

Plausibly, most of them would buy into equities, whose upside is now predicted imminent. "I don't see why the stock market should continue falling when inflation is this high and interest rates are declining," noted an equity analyst with Interfin Securities yesterday.

"There is more upside potential for the stock market, and we expect institutional investors to start moving in in the next week or so."

Of the index shares on Wednesday, banking group FBCH paced decliner falling 35 percent followed by retailer Redstar which lost 34 percent. Dawn Properties gave up 29 percent, as well as Innscor while Pearl Properties dragged 27 percent. Tuesday, heavyweights led declines. Old Mutual lost $3 million to $20 million, KMAL shed $1 million to $13 million and Delta dropped $50 000 to $1,6 million

Financials Barclays rose $30 000 to $400 000, CBZ was $50 000 ahead to $750 000 and ABC was unchanged at $2,5 million.

CFX was down $2 000 to $28 000 with the group saying that it would start an agribusiness unit where the main exports would be on horticulture for exports. Meanwhile export earnings from agriculture rose 13 percent to $224 million with tobacco putting in the most.

Interfresh shed $2 000 to $70 000, Ariston put on $15 000 to $100 000 and Seed Co was $650 000 to $2,05 million. The equities slow down is not expected to last many more days to come, according to analyst estimates, but given the negative forecasts on inflation, from where the market has built own fort.

In 2007, the main index posted a yearly growth in excess of 335 000 percent while minings rose more than 500 000 percent, almost 15 times as much as November 2007 inflation at 26 000. Equities have thus managed to hedge against the vagaries of high inflation, and are likely to continue so doing in the short to medium term.

Finance Minister, Dr Samuel Mumbengegwi has predicted December 2008 inflation at 1 978 percent.



Source: Copyright © 2008 The Herald.