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Negative investor sentiment drags down Zimbabwe Stock Exchange

Negative investor sentiment drags down Zimbabwe Stock Exchange

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Published: 6 August 2013

HARARE — The Zimbabwe Stock Exchange (ZSE) ploughed new lows on Monday as investors weighed the negative effects of a Zanu (PF) election victory and moves by President Robert Mugabe to finalise the country’s indigenisation policy and reintroduce the Zimbabwe dollar.

The country’s economy, for which expected growth for 2013 has been revised down to 3.9% from an earlier 5%, could see a large-scale flight of investors, economic analysts said.

There has already been concern over an empowerment policy that would rule out monetary compensation for shares ceded by foreign groups.

Investors had up to now been resilient on the ZSE, pouring money into stocks such as Delta Corporation, a unit of global brewer SABMiller, Econet Wireless and Innscor Africa, among others. Analysts said the attraction was the strong fundamentals of the ZSE blue-chip companies, which had bucked economic difficulties in Zimbabwe in the past few years to report earnings growth.

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But that resilience was strained on Monday as the ZSE dropped 11% — just two days after Mr Mugabe was announced as the winner of last Wednesday’s presidential poll, beating Prime Minister Morgan Tsvangirai of the Movement for Democratic Change with 61% of the vote. The benchmark industrial index closed Monday’s session at 205.6 points after falling from the previous trading session’s 231.21 points.

“The ZSE main industrials index lost ground on Monday as investors tried to sell off shares following last week’s elections,” said analysts at Lynton Edwards Securities in a market commentary on Monday afternoon.

ZSE dealers said the previously attractive ZSE stocks, including Econet, Delta, Innscor, OK Zimbabwe and Dairibord Holdings, had surrendered to negative investor perceptions.

“This is a new trend but it (coincides) with concerns that the elections outcome is not a reflection of the will of the people,” independent economic analyst Moses Moyo said.

“If there is no agreed and acceptable end to the political crisis that has started to emerge from the elections, the economy and mainly the equities market in Zimbabwe will see a massive sell-off and investors turning their attention away from Zimbabwe,” he said.

In Monday’s session, Delta lost 20% to close at $1.20, Innscor shed 14.29% and OK Zimbabwe eased 13.33%. The other notable faller was Econet Wireless, which lost 14.71%.

Edgars Stores Zimbabwe declined 29% while Truworths Zimbabwe slowed down 17%. The mining index declined 2%, completing a bad patch on the exchange that analysts expect to persist for the next few weeks.

“The losses forced the total market capitalisation to close way lower at $5.34bn from $5.97bn on Friday,” said the Lynton Edwards Securities analysts.

Only Old Mutual Zimbabwe, up a marginal 0.01%, and ZHL, up 16.67%, closed the day in positive territory.

Analysts said the “key issues that investors are concerned about are the reintroduction of the Zimbabwean dollar as well as the implementation of the Indigenisation and Economic Empowerment Act”.

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