[2008-08-12]  Uncertainty takes toll on stock market
ZIMBABWE Stock Exchange shares continued drifting sideways last week, as market makers like Old Mutual dragged and other lightweight shares notched significant gains.

At close Friday, the mainstream industrial index lost 3,5 percent to 21 00,40 points after losses in first-tier stocks. The decline was, however, not strong enough to erase gains of 37,7 percent on Thursday.

But minings rose 9 percent to 22 248,75 points helped by gains in nickel miner Bindura and Rio Zim, the gold and diamond producer. The index leapt 20 percent a day earlier.

In Friday trading, bids met offers reflecting the volatile type of trade on ZSE on the day and volume rose.

More than 291 000 Bindura shares worth $20,1 million were traded in a special bargain. The unit price was $69.

Other notable volumes were recorded in Art Corporation (540 000), Old Mutual (with 61 509) and ZHL (with 700 000).

The main index lost 20 percent of its value on Tuesday, and was down 22 percent at week opening, as investors pocketed profits from an earlier rally. It rose 10,1 percent on Wednesday, the week’s only increase.

On Monday, the resource index slumped 37,1 percent and lost 13,7 percent on Tuesday. At midweek, minings gained 7 percent.

Over the year, the main index is up more than 11 million percent while minings have grown by 9,4 million percent since January.

In recent days, there has been a reasonable flight of capital from the stock market to the foreign currency market where the cash rate has doubled to $35 per US dollar.

Investors are more concerned about several things, but mainly the inflation outlook, which has been the biggest driver for the stock market in the last five years.

Zimbabwe’s annual inflation rose to 2,2 million percent at the end of June. There is concern the figure could climb higher on rising food and service prices.

Punters are betting on weak inflation forecasts, and moving funds into equities as an inflation hedge.

Also, jittery investors have parked funds in penny and second-liner shares, which gained most in the review week.

The equities’ graph has been like this for close to three weeks now — consternation, impromptu mini-rally in heavyweights followed by weak bears and the surge in second- liner shares.

Mostly, people take a cue from the bellwether stocks like Old Mutual, PPC and Econet. OM owns a stake in more than 50 percent of all ZSE counters.

It is this that mostly influences most decisions on investing on the market — the belief that OM represents value, and that where it invests, certainly there is value in that stock too — and not earnings guidance or other economic variables. Seldom do individual shares respond to such fundamentals in the current economic set-up.

And so the market has been in this trend, losses in heavyweights followed by gains in penny stocks, which naturally represent the movement of money from the Old Mutuals to the Fidelity type of shares.

Currently, there is excess liquidity in the market still trying to find a home. The money market closed more than $640 quadrillion in surplus on Friday.

This home has mainly been the stock market, property market and foreign currency market. People are borrowing to buy shares. Right now, the market is uncertain. It awaits the outcome of the inter-party talks. The outcome of the talks can mean anything for the stock market — crash or rally.

It may be time for the medium to long term investor to do their maths and carry out the fundamental and technical share analysis and create a sound investment portfolios. We may not really like it, but the rest is mainly guesswork, some form of luck.

Of the index shares Friday, heavyweight counters fell most. Astra paced decliners, falling 44 percent followed by Econet which lost 27 percent. OM closed down 25 percent while PPC and Medtech shed 21 percent and 20 percent respectively.

Of the ZSE shares, Zimpapers doubled its price $1 followed by NTS which gained 62 percent. ZPI, Fidelity and TSL rose 56 percent, 50 percent and 40 percent in that order.

Source: Herald