Senior Business Reporter
Old Mutual Securities (OMSEC), a unit of Old Mutual Zimbabwe Limited, says property sector players who can adapt and provide properties that can service the specialised needs of growing sectors of the economy are expected to improve on their earnings yields in 2022.
In its report, the Portfolio Manager’s Digest for the fourth quarter 2021, OMSEC said, overall, the property sector remains a good medium to long-term hedge against inflation.
“Property sector players who can adapt and provide properties that can service the specialised needs of growing sectors of the economy such as agriculture, warehousing, and logistics as well as sections of the retail and informal sector are expected to improve on their earnings yields,” it said.
The report noted that the market is likely to remain under pressure from Covid-19 restrictions and low rental yields.
“However, the adoption of Zimbabwe dollar-based valuation is expected to support capital price appreciation,” said the brokerage firm.
It added that liquidity and valuation challenges are expected to limit investments into property, but based on this assumption, the equity sector remains attractive in the short to intermediate term from a liquidity and value preservation perspective.
OMSEC said it anticipates annual inflation of over 40 percent for 2022 and Money market investments are likely to be constrained by current inflationary concerns.
OMSEC also highlighted that public sector expenditure is expected to continue playing a major role in driving aggregate demand in the economy in 2022 given the budgeted expenditures amounting to $927,3 billion.
It said expenditure is premised on revenue projections of $850,8 billion and a domestic market-funded budget deficit of $76,5 billion.
“More resources are expected to be channelled towards developmental programmes and projects, which include infrastructure, social service delivery and social protection.
“Some of the listed entities are anticipated to benefit from this huge government outlay,” said OMSEC.
It noted that while the impact of Covid-19 is expected to be mild in 2022, the pandemic is anticipated to continue clouding the business outlook as the risk of new variants and waves remains high in the absence of herd immunity.
Commenting on the investment markets review and outlook, OMSEC said the growth in the Zimbabwe Stock Exchange (ZSE) market capitalisation has been supported by firm demand for shares on the local bourse as investors continued pursuing value preservation strategies through real assets such as equities.
It said inflation pressures are expected to sustain value preservation strategies in 2022, resultantly; the equities market is projected to maintain a bullish trend in the year.
“In addition to inflation, increased aggregate demand mainly public sector is driven and dollarisation of the economy is anticipated to support volumes and earnings growth for selected listed entities.
“Some of the challenges likely to undermine company valuations in the outlook are a relatively sticky auction rate and multiple exchange rates,” said OMSEC.
On the Money Market, OMSEC said despite tight fiscal and monetary policies, inflationary pressures continue to suppress the performance and attractiveness of interest-bearing investments.
“We expect money market investment returns to remain sub-inflationary,” it said.