[2008-03-25]  Stock Prices Weaken Sharply
Stock prices weakened sharply at close last week, as investors pocketed profits from a rally that has lasted nearly six weeks.

This week, equities are expected to remain bearish ahead of the March 29 polls. In the short-to-medium term the outlook for the Zimbabwe Stock Exchange remains bullish underpinned by weak inflation and negative interest rates.


In Thursday trading, the main industrial index finished down 6,33 percent at 12 518 103 248,16 points falling from a peak of 14 593 000 257,14 points reached on March 18. Over the week, the main index lost 2,7 percent from a gain of 63 percent in the week ago period. On a year-to-date basis, the index has risen over 550 percent versus January month-on-month inflation of 120 percent.

At close on Thursday, minings dropped 0,58 percent to 7 677 175 928,94 points and has fallen from a record 9 356 242 541,97 points reported on March 13. The minings index capped a week of losses. On Monday, the resource index tripped 3 percent, fell 3,54 percent on Tuesday before shedding a weighty 11 percent on Wednesday. Week-on-week, the index lost 16,78 percent compared with a growth of 61,3 percent posted a week earlier, and is up just over 220 percent since January 02. Mining stocks have benefited from firming international commodity prices, which have seen gold break records at over US$1 000/oz, and gaining more than 32 percent in 2007.

Of the index shares last week, 45 counters gained with five of them rising in by more than 100 percent. Twenty-one counters fell. Average ZSE daily turnover reached $16,3 trillion on Thursday, down 76 percent and more than 100 percent from the week before. Total market capitalisation touched $154 000 trillion on March 20, falling from nearly $180 000 trillion on March 18. More than 95 percent of this figure is from industrial counters. Stockbrokers said the market pull back would not last longer, as there was so many fundamentals supporting a bull market on the ZSE. "Investors are hedging their financial assets against hyperinflation thereby effectively competing with other non-interest bearing assets such as property and a host of other non-interest earning alternative markets," said a Harare stockbroker.

"We expect the market to remain largely firm on the back of the continued negative returns obtaining on the money market, continued rising inflation rate and the shortages of investment options." Fixed income investments continue to perform badly due to the continued excess liquidity conditions on the money market emanating injections from fiscal and quasi-fiscal expenditures to fund, among others things, the farm mechanisation programme. Money market surpluses have reached over $700 trillion and helped short-term deposit rates fall precipitously. Of the ZSE shares on Thursday, Blue chip Delta lost $1 million to $17 million, Old Mutual dropped $10 million to $100 million and KMAL fell $3 million to $55 million after its chief executive was named director of the year.

CBZ was down $800 000 to $3,2 million after its mid-week December finals. Beverly Building Society's performance steered the group to an above inflation increase in net profit in the full year. Attributable profit was $32,74 trillion, an increase of 189 576 percent. Of that amount CBZ Bank made up 11,6 percent at $3,8 trillion, Beverly 58,6 percent at $19,2 trillion, Datvest 20 percent at $6,5 trillion and other 9,8 percent.

NicozDiamond was steady at $380 000 after its financials. The group reported earnings per share of $26 253,60 from $7,88. Afre lost $100 000 to $4,3 million while subsidiary Pearl Properties was $400 000 lower at $1,9 million after a fair value adjustment comprising 99 percent of earnings saw the group report a 131 774 percent increase in earnings to $115,5 trillion after a deferred taxation charge of $51,2 trillion.

Of the ZSE shares, there were gains in Afdis, which rose $1 million to $12 million, Astra $100 000 ahead to $1,1 million and Willdale up $5 000 to $65 000 after saying that it was commencing brick exports into the region.



Source: Copyright © 2008 The Herald.