Pep talk fails to boost investor confidence in the ZSE

With the country plagued by bad news almost on a daily basis, even the most optimistic investors seem to have run out of patience. And all the pep talk that accompanied the disbursement of the International Monetary Fund standby facility has failed to boost investor confidence.

One market analyst even said that at present there are “just too many uncertainties still facing the market, and indeed the country” that the majority of investors would rather stay away from the stock market settling instead for the money market which is offering better returns.

The key industrial index which stood at 7 347 points on June 1, just before the announcement of the much anticipated International Monetary Fund US$175 million standby facility, was still languishing at 7 386 points by July 17, a clear indication that something was terribly wrong.

Even the newest entrant, the Commercial Bank of Zimbabwe which came on with a lot of steam after securing heavyweight partners, Amalgamated Banks of South Africa and the International Finance Corporation, saw its price which had skyrocketed by 50 percent in the first week of trading getting re-rated downwards.

Although the announcement of the proposed listing of medical company Macmed Holdings and cellular phone operator Econet, this month and next month, was expected to lift the market, it has so far failed to do so.

Both Macmed and Econet are in some of the fastest growing sectors. The medical, pharmaceutical sector is fast expanding while the cellular sector is also expanding and has now three operators in the country, all on line.

One market analyst even commented that the new issues may raise levels of interest in the market, but it is likely to be brief.

“For as long as interest rates remain high, offering attractive low risk returns to investors, we do not foresee much in the way of recovery for the market,” the analyst said.

Bit it will be interesting to watch how Econet performs. Not only has the company come on line with a bang having been on the spotlight for a full month sponsoring the world’s most popular sport, France’98 World Soccer Cup, but chief executive Strive Masiyiwa has even stated that the response by subscribers has been so overwhelming that they had to commission their lines in stages to avoid congestion.

Having won the licence after four years of struggle, people are flocking to Econet not just for business but also for moral support.  Some subscribers of the Posts and Telecommunications’ Net One have been heard to be saying they will soon be switching to Econet once it is on line.

By floating the company, Masiyiwa will also be keeping his promise to open the company to the public. This should be a plus for the company and should make the share popular.

Macmed too should do well judging by the performance of the local pharmaceutical company, CAPS. Since its near collapse two years ago, CAPS has been doing exceptionally well and investors who have failed to get a stake in CAPS may find their solace in Macmed.

But this is likely to be overshadowed by the bad news. Inflation is once again on the rise putting pressure on interest rates. The figure for June, put at 29.8 percent, only a 0.5 percent increase from May is considered by many as an understatement because the consumer price index has continued to go up despite the price controls imposed by the government.

According to one analyst, because of the current wage demands, businesses which are not subject to price controls are likely to push up their prices if they are to survive. Wage settlements this year are said to have averaged 33 percent.

There is also still the unanswered question of fuel price increases. The uncertainty about when the increase will be implemented may also be putting a damper on the market because it will inevitably have to come.

The collapse of the South African rand which was expected to bring some relief to importers was short-lived. The local currency also started falling under pressure and this did nothing to boost investor confidence in Zimbabwe as “foreign investors become exposed to an even greater degree of currency risk”.

But the biggest worry should be the proposed five-day stay-away by the Zimbabwe Congress of Trade Unions. It is bad news, the worst this year, should it go ahead.

Analysts say if it goes ahead, the country is likely to lose $300 million a day making a total of $1.5 billion for the week. While the previous stay-away was peaceful, there are no guarantees that the proposed one will be, especially since it appears that the government is doing everything, apart from stepping down, to accommodate the labour movement.

Like in the food riots in January where it became apparent that the ruling party may have had a hand, it could also throw in its hand to turn the stay-away into a messy job. While this will sink the country, at least the politicians will have someone to blame.

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