Manufacturing
A demand induced production lift extended into the first quarter of the year with at least 15 manufacturing companies listed on the ZSE realizing sharp volumes and profitability growth ahead of the same period last year.
Notable developments include the commissioning of a $30 million Pepsi bottling plant and a $3.5 million Splash Paint and Plastics plant.
Most companies hamstrung by forex shortages have failed to implement substantial capital projects utilizing own flows. Most forex denominated facilities are strategically allocated to exporters as financial institutions hedge against repayment risk.
Financial sector
Money supply stood at $7.8 billion as at February which is an exorbitant year on year growth of 36%. Transferable deposits have been the force behind the growth having spiked by 47% over the same period. As a result, domestic credit went up by 38.5% to $10.5 billion between February 2017 and February 2018.
Credit growth was largely stimulated by a growth of $2.3 billion in credit extended to government from $3.9 billion to $6.8 billion as at February.
Trends in banking show a sustained upsurge in transactional business which in turn, has overlapped the impact of partial funded income slowdown to drive overall incomes up. Fee and commission income growth is supported by increased transactions volume as banks refocus.
Funded income is hamstrung by declining interest rates and high default risk in private sector lending. Sovereign paper remain the preferred interest earning asset and a slowdown in TB issuance may lower income from net interest income.
Stock market performance
In the first half of the year stocks have hovered in either direction although having closed the period with residual gains. The performance is best split between the 1st and 2nd quarter as in the former the performance was negative and positive in the latter.
The weaker first quarter performance saw a downward rerating after a prolonged inflation induced and confidence inspired growth in late 2017. However the northward trending in Q2 was driven by firm reported earnings as companies largely enjoyed increased volumes and revenue performances, thus driving profitability up. Consequently upward valuations were supported.
Agitated investors largely risk averse also supported Q2 price recovery on increased buying a trend likely to be enjoyed up-to elections.
Turnover levels for the first half were significantly higher than the same period last year and trades were largely concentrated in cherry-picked heavies Econet, Old Mutual and Delta.
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