The Zimbabwe Stock Exchange is forecast to recover 15 percent starting February to close the year with market capitalisation of $3,42 billion. ZSE’s market cap registered a 32,3 percent decline in 2015 to close at $3,2 billion while the main industrials index was down 29,5 percent during a generally difficult year for most southern African stocks. The decline in Zimbabwe’s industrial stocks was, however, significantly more than the sub-Saharan Africa average of minus 19 percent.
Equity analysts have forecast ZSE’s upside potential in 2016 at 15 percent and market capitalisation of $3,42 billion by close of year based on Government’s forecast economic growth of 1,2 percent.
“Downside risks to the forecast emanate from potential underperformance in agriculture, sluggish GDP growth and possible worsening in liquidity conditions.
“Weak commodity prices and the ramifications of a stronger US dollar in 2016 will likely have negative implications for flows into emerging and frontier markets, with flow likely to favour developed markets again in 2016.
“We believe that the market has already priced in these risks to some extent and that there
will be select buying opportunities in oversold stocks,” said leading equities research firm Inter Horizon Securities in its latest report titled Zimbabwe Equity Strategy 2016.
“Overall we remain neutral on Zimbabwe equities relative to the rest of SSA markets” most of which did not have a particularly good 2015.
The generally poor performance of ZSE stocks was driven by poor earnings performance, broadly negative sentiment by foreign institutions focused on SSA markets, subdued GDP growth, and constrained liquidity, as the current account deficit continued to persist.
In terms of liquidity, value traded on the ZSE fell by 40,3 percent to a five-year low of $233.6 million, with 17 counters registering positive gains, notable among the large caps being BAT up 8,93 percent and CBZ up 9,9 percent, while 41 counters recorded losses.
The tourism sector is expected to support economic growth as well as an expected turnaround in agriculture and mining to yield positive growth.
Going forward, IH said they believe that the key drivers of the economy; mining and agriculture will continue to be affected by weakness in global commodity prices and pervasive structural issues linked to poor funding and foreign direct investment in both sectors.
“We maintain that there is a critical need for the country to compete for and attract the limited FDI available for the region,” IH said.