[2008-05-20]  Forex liberalisation opens avenues
THE liberalisation of the exchange rate by the Reserve Bank of Zimbabwe has thrown open investment choices in the country.

With the money market performing badly in the past few months, investment choices in the country had been reduced to the Zimbabwe Stock Exchange and the property sector.
In interviews with Sunday Business, stock market analysts said the bourse had been subdued owing to the floating of the Zimbabwe dollar.
“All along there was no viable alternative investment vehicle. Choices had been reduced to equities and the property markert. The ZSE has always been bullish because of the control of the foreign currency market. The property market as a long term investment vehicle needs a lot of money,” said a stock market analyst with Kingdom Unit Trusts.
The liberalisation of the foreign currency has seen major currency gains steadily against the local currency. By Friday the US dollar was $255 160 500,00, the British pound was $496 976 105,85, the South African Rand was $33 740 677,56 and the Euro traded at $394 784 325,60.
The stock market analyst said the liberalisation of foreign currency has opened another investment vehicle with people moving their money from the ZSE and keeping it in hard currency.
“Exporters are given up to 21 days to utilise their foreign currency. That means that companies can legally keep their money for 21 days and when they sell it they can still get a fair value for it. For individuals it can be permanent. Pressure that all along has been on the ZSE is now being shared. The floatation of the currency has indeed contributed to the performance of the ZSE,” he said.
The stock market analyst said the local bourse has been affected in two ways with counters such as mining gaining and performing well.
“Mining counters have been able to release and benefit because of the increase the international market. The exchange rate has directly benefited these companies that have managed to get fair value form international markets,” he said.
During the past week the mining index hit the 90 912 578 822,96 mark and was still going up.
Affirming that mining prices are firming world wide Kingdom Bank analysts, in their weekly update, reported that the U.S. gold futures held on to robust gains into the close on Thursday as a string of weaker-than-forecast U.S. economic reports and healthy physical demand underpinned the precious metal.
It said the June gold contract on COMEX division of New York Mercantile Exchange finished with $13.50 gains at $880.0 an ounce.
“Oil's price rise also boosted gold early. But the yellow metal remained supported even when crude prices turned lower,” the analysts said.
A Kingdom analyst said other counters that have benefited include Old Mutual and Portland P Cement (PPC) that are listed outside the country. Old Mutual is listed on the London stock Market. PPC is listed on the Johannesburg Stock Market.
“Retailers and other such counters have been affected. This has seen the industrial index come down and the mining index go up,” he said.
During the week the industrial index hovered at around 108 444 380 538,63.
The market analysts said the liberalisation of the foreign currency would have an effect of raising confidence in the authorities and the market is waiting to see if it will be the new dispensation.
“The liberalisation of the foreign currency is a good starting point,” he said.
Since the end of last year the stock market has become a huge investment destination and was in an unprecedented bull run towards the end of last year. It however started the year on a low note and picked with time only to succumb to profit taking by investors from time to time. Analysts attributed this to the fact that there were a number of speculative and short time investors who were prone to ransack the bourse for profits from time to time.



Source: (C)2008 THE HERALD LIMITED