Stocks fall as govt ups empowerment drive
http://www.theindependent.co.zw/
Thursday, 13 October 2011 15:36
Reginald Sherekete
STOCKS fell significantly in the third quarter in the wake of heightened
indigenisation threats by government, which dampened investor confidence and
sentiment. The key industrial index shed 6,80% to close at 155,82 with the
mining index plummeting 11,03% to close the quarter to September 30 at
152,42.
Market capitalisation fell by 14,12% after foreign buyers deserted the
market.
Foreign investors have been driving activity on the Zimbabwe Stock Exchange,
given the current tight liquidity challenges facing the economy.
Foreign deals accounted for 70% of the trades on the ZSE, with local
investors, mainly institutional investors, playing a limited role.
In the same quarter, a total of US$43,5 million shares were bought by
foreign investors with foreign sales totalling US$45,2 million, a sign that
investors became very wary of the country risk and could not hold on to
their shares given the unclear investing environment.
Government in the same quarter set the deadline for submission of
indigenisation proposals to September 25, 2011, a development that put the
spotlight on mining companies such as Zimplats and foreign-owned
institutions as Old Mutual, Standard Chartered Bank and Stanbic.
In September alone, foreign activity in the market was subdued, with only
36,7 million shares worth US$7,3 million being bought against a selloff of
50,1 million shares worth US$9,1 million.
The mining index in the period under review shed 24%, with the industrial
index gaining a marginal 3%.
In the quarter, 36 counters fell while 31 counters recorded gains, and 8
counters were static.
Retail counters led the pack with Pelhams and TN Holdings Ltd both surging a
massive 400% to 80US cents and 4US cents respectively.
The introduction of credit terms on products has greatly driven sales for
retailers. Most retailers are now offering credit terms for periods longer
than six months, much to the relief of consumers who are currently facing
tight liquidity challenges.
Pelhams has gone up 700% as of end of September.
TN Holdings Ltd’s share price performance was buoyed by a set of good
interim financial results in which it made a profit of US$5,7million,
compared to a US$1,56million loss in the prior year. The growth in earnings
was as a result of a significant turnaround in the furniture business and
also a notable increase in profits from the banking division.
Falgold snatched third position following a commendable set of results in
which it posted a profit after tax of US$736 020 from a loss of US$1,9
million in the prior year. Firming commodity prices saw the price of gold
peaking above US$1 800 in the quarter mile the market welcomed news that
operations at Dalny Mine and Golden Quarry Mine had resumed.
The bottom five performers for the quarter were NTS, Rio Zim, Radar, Celsys
and Caps. Most of these companies are facing multifaceted problems which
include undercapitalisation, huge debt burdens and low capacity utilisation.
In the current quarter to 31 December 2011, the market will await the 2012
Budget statement where most companies will be anticipating policy measures
which can give impetus to their operations and hopefully turn around their
fortunes.
With the current bickering on elections by the major political players, it
would be interesting to note if the budget provides funding for a referendum
and elections. The holding of elections next year will continue to dampen
confidence on the stock market, since the country risk will definitely go
up, which in turn will scare foreign investors.