Of 2016 market performance, future forecast

ZSEEnacy Mapakame Bulls&Bears —
IN 2012, Bulls and Bears took a long “break”. The column finally makes a return this first week of 2017, where market indicators have swung up and down in the first two sessions of the year.

Generally, punters anticipate good returns on their investments, that is why they take the “risk” to invest on the equities market, despite their volatility and unpredictability of markets such as ZSE .

This is usually based on forecasts, either on stock-specific trend or macro-driven factors.

But even forecasts can mislead in this environment dominated by unstable macro-economic forces, stemming from both the domestic and global factors.

One only needs to remember how the fluctuations in global prices of commodities affected economies everywhere, especially those that rely mainly on the extractive industry, and how the El-Nino induced drought caused havoc in Sub Saharan Africa economies due to its negative effects on agriculture.

In the end, choosing portfolios that give good returns is the most important process. Hopefully, Zimbabwe Stock Exchange investors and new investors will have smiles this 2017.

Before looking at the 2017 equities outlook, a brief review on the 2016 market performance and economic developments may be necessary.

In 2016, the mainstream industrial index gained 27 percent to 144.53 from January opening 114 on gains in both heavy cap counters and mid tiers. This helped the ZSE become one of the best performers in the region for the year.

Total market capitalisation rose 37 percent to close the year at $4,04 billion from January’s $2,94 billion on sustained gains pre and post introduction of bond notes.

The much hyped bond notes debuted on the market on November 28 as an export incentive and to ease the cash shortages that started early last year.

This also makes 2016 the second best year for the equities market since dollarisation.

Mid-tier General Beltings enjoyed a bull run in year topping risers. The industrial holdings company surged 700 percent to 0,8 cents followed.

Top cap counters, Delta, Econet and BAT rose 24 percent to 88 cents, 42 percent to 30 cents and 37 percent to $16,75.

While these are expected to weather the storm in 2017, reduced profitability will likely weigh down on these market leaders. In their past updates, Delta and Econet have all indicated shrinkage in revenues, profitability and volumes on low consumer spending, a situation that may be prolonged in 2017.

Industrial behemoth, Innscor Africa added 68 percent to close 2016 at 49 cents also making up the 38 counters that rose in the year.

At least eight of the top 10 counters closed firmer except financial institutions CBZ Holdings and Barclays which were part of the 17 stocks that closed the year weaker.

The liquidity challenges are expected to continue weighing down on financial stocks.

On the losing side, cement producer PPC weakened 50 percent to end the year pegged at 50 cents. Other losses were recorded in Medtech which closed the year 50 percent weaker to 0,02 cents while Border Timbers succumbed to a 49 percent loss to 20 cents.

Seven stocks maintained opening year levels.

Now, while punters would like to see positive results on the bourse, market watchers are downbeat on 2017 stocks performance as broad weaker financial performances weigh on the market.

With the liquidity shortages inherited from 2016 persisting, stocks are likely to be at the receiving end as investors adopt a wait and see attitude.

The overall liquidity crisis that has been persistent in the economy and the perceived risk profile is also expected to extend the under-performance by banking stocks.

However, the five percent export incentive funded through bond notes are expected to boost local production as well as export growth, support value chains and cascade to the entire economy.

The country has adopted a deliberate focus on export growth which is expected to help maintain the growth in resource counters. Minerals and tobacco are the country’s top export earners.

Last year, the mining index rose 132 percent to 58 sustained by gains in Bindura and RioZim.

Agriculture and mining, which both anchor the economy are expected to grow 12 percent and 0,9 percent respectively while overall economic growth is projected at 1,7 percent.

This is expected to create relief for agro-based stocks such as Natfoods.

Additionally, Finance and Economic Development Minister Patrick Chinamasa indicated Government was working on strategies to improve the stock market’s competitiveness and address investor apathy.

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