Business / Economy
'Politics drive big spurt in Zimbabwe equity trading,' says Imara
13 Sep 2013 at 09:35hrs | Views
Zimbabwean politics are driving a huge spurt in trading volumes on the Harare stock exchange.
The recent election victory of incumbent president Robert Mugabe may have led to a sell-off by some, but simultaneously created a value opportunity for others, said the country's oldest stockbroker, Imara Edwards Securities.
Ins and outs by foreign investors created a record month for trading volumes in the market. .
Tino Kambasha, executive director of Imara Edwards, noted: "The market had had a good run and the election result triggered a correction that had been in the offing for some months. In general, it seems South African based investors were happy to sell and take profits.
"Certain late-comers who missed out – largely Europeans and Americans – were eager to buy at new levels, seeing the potential for long-term gains as the country's underlying economic fundamentals remain positive."
In August some blue-chips reached apparently bargain levels. Barclays Bank was down 47% by month-end, BAT Zimbabwe was off 30%, Delta and Econet fell by 27% and Innscor shed 22% of its market capitalisation.
However, by election day at the end of July the market had achieved a 12-month gain of 76% in US dollar terms.
"South Africans and others who a year ago had bought Delta shares at 70 cents were quite content to sell after a 25% market pullback because they were still exiting at 110 or 115 cents," said Kambasha.
"Record August trading volumes were driven almost exclusively by foreigners. Those foreigners who bought into the pull-back are sophisticated investors. They are well aware that Zimbabwean politics can create volatility.
"They are also aware that some other equity markets in sub-Saharan Africa have reached quite healthy levels and Zimbabwe still has some catching up to do, so there is long-term growth potential."
Kambasha believes trading volumes could remain at elevated levels for some time to come.
"Domestic investors stayed on the sidelines in August," he noted, "but in September we saw the first indications of buying by local institutions. They were rewarded by some early gains.
"The day after President Mugabe announced his new cabinet, the market rose 2.82%. Commentators noted that several business-minded ministers and technocrats were part of the mix. This sent some reassuring signals.
"The prospect of solid corporate earnings is also positive. Listed companies in the property and insurance sectors have recently posted good results. The rollercoaster ride may continue for a while, but look ahead, keep your eye on the horizon and you won't get queasy."
The recent election victory of incumbent president Robert Mugabe may have led to a sell-off by some, but simultaneously created a value opportunity for others, said the country's oldest stockbroker, Imara Edwards Securities.
Ins and outs by foreign investors created a record month for trading volumes in the market. .
Tino Kambasha, executive director of Imara Edwards, noted: "The market had had a good run and the election result triggered a correction that had been in the offing for some months. In general, it seems South African based investors were happy to sell and take profits.
"Certain late-comers who missed out – largely Europeans and Americans – were eager to buy at new levels, seeing the potential for long-term gains as the country's underlying economic fundamentals remain positive."
In August some blue-chips reached apparently bargain levels. Barclays Bank was down 47% by month-end, BAT Zimbabwe was off 30%, Delta and Econet fell by 27% and Innscor shed 22% of its market capitalisation.
However, by election day at the end of July the market had achieved a 12-month gain of 76% in US dollar terms.
"South Africans and others who a year ago had bought Delta shares at 70 cents were quite content to sell after a 25% market pullback because they were still exiting at 110 or 115 cents," said Kambasha.
"Record August trading volumes were driven almost exclusively by foreigners. Those foreigners who bought into the pull-back are sophisticated investors. They are well aware that Zimbabwean politics can create volatility.
"They are also aware that some other equity markets in sub-Saharan Africa have reached quite healthy levels and Zimbabwe still has some catching up to do, so there is long-term growth potential."
Kambasha believes trading volumes could remain at elevated levels for some time to come.
"Domestic investors stayed on the sidelines in August," he noted, "but in September we saw the first indications of buying by local institutions. They were rewarded by some early gains.
"The day after President Mugabe announced his new cabinet, the market rose 2.82%. Commentators noted that several business-minded ministers and technocrats were part of the mix. This sent some reassuring signals.
"The prospect of solid corporate earnings is also positive. Listed companies in the property and insurance sectors have recently posted good results. The rollercoaster ride may continue for a while, but look ahead, keep your eye on the horizon and you won't get queasy."
Source - cleardistinction
