ZSE warms to soft indigenisation approach

via ZSE warms to soft indigenisation approach | The Zimbabwe Independent by Chris Muronzi September 12, 2013 

Stocks rose on Wednesday, a day after President Robert Mugabe announced his long-awaited cabinet, driven by gains in heavyweight counters, but analysts warned this was not an endorsement of the appointments.

The mainstream industrial index surged by 5,25 points, up 2,82%, to close at 191,14 points, on the back of gains in heavyweight counters such as Delta and Econet.

Delta rose by US6,99 cents to trade at US127 cents, Econet added US3,49 cents to US55 cents and Seedco put on US2 cents to close at US80 cents. OK Zimbabwe went up US1,11 cents to US23,10 cents, DZLH edged up a cent to trade at US19 cents and Nicoz was US0,40 cents firmer at US2 cents.

Economist John Robertson said the market had conditioned itself and saw no further bad news from Mugabe.

“People might have been fearful of bad news and they could have seen that nothing will change, or things can’t get any worse at least. People have been watching and they have seen there is no further bad news perhaps. However, the change is not too significant, because there is no proper investment taking place,” Robertson said.

He added: “We could see changes in policy, but I think people have just put up with the idea of living with the mixture. There is no guarantee that things will keep improving though, because you can see agriculture production is down and mining and banking are also not doing their best.”

On the downside of Wednesday’s ZSE trade, Old Mutual lost US5 cents to trade at US22 cents, Mash dropped 0,42 cents to US3 cents, Padenga slipped US0,09 cents to close at US5,01 cents and Medtech eased US0,01 cents to close at US0,06 cents.

The mining index put on 1,56 points, up 3,31%, to close at 48,73 points after Riozim was bid higher at US25 cents. Bindura, Falgold and Hwange were unchanged at previous trading levels.

When Mugabe won the disputed July 31 presidential election, the ZSE, which had advanced a solid 51,72% since the beginning of the year, fell by a solid 11,09%, trimming the year-to-date gains from 51,72 to 34,89% in a single day. Market capitalisation fell by a hefty US$626,33 million to US$5,41 billion.

Analysts said while the new cabinet did not inspire much hope for the economy, the appointment of Francis Nhema as Indigenisation Minister meant the aged leader wanted to calm the markets down and go for a softer approach on indigenisation. The perceptibly soft Nhema takes over from the brazen Kasukuwere.

“Anybody who knows markets will start picking up a lot of these cheap ZSE bellweather stocks for a song. There are a number of companies that will continue to have solid future performance prospects, come rain or shine.

Now is the time to buy, not recklessly, as markets tumble. A careful selection will yield handsome returns in the near to medium term for astute investors. A cardinal rule of stock markets is you don’t buy when the market is going up and you don’t sell when the market is going down,” an analyst advised.

However, another analyst said Wednesday’s performance was unrelated to the appointment of a cabinet by Mugabe but mirrored a general business as usual approach post the election.

“The market started firming on Friday before the cabinet announcement.I don’t think today’s performance is in any way related to the new cabinet.

“The fact of the matter is people do not have confidence in the new cabinet, especially the person who has been seconded to the Finance ministry. The market is firming because people are taking a business as usual approach. They realise that life must go on.They are tired of waiting on the sidelines. Also, the blue chips were now cheap compared with regional comparatives in terms of valuations. Those are the shares that are moving,” an analyst said.

While the market has adjusted to the “new normal”, analysts said the upward trend was not sustainable going forward.

“The interest in blue chips only reflects caution,” an analyst said.

Economist Takunda Mugaga said: “There is a possibility that the coming in on board of Francis Nhema is evidence of how Mugabe is softening his stance on indigenisation. Nhema is a testimony of Mugabe’s retreat, he is still moving forward but he is taking three steps forward and two backwards.

“Nhema is a soft kind of minister in terms of his reputation and he is likely not to read too much into the Zanu PF manifesto. His appointment is evidence that a hulkish way of doing things is not viable.

“It can also reflect a relief in the market regardless of who is in cabinet because it completes the governance status and investors are saying let’s move on. It might maintain a modest trajectory but there is room for more recovery. There is a mystery on how Nhema reacts, he may want to prove a point.”