Weekly Stock Market Watch (ZSE)

  • The ZSE All Share Index added 1.7% in the week under review
  • Completed a clean 2 weeks slate of gains from the beginning of the year
  • 4 of the 13 ZSE indices tracked by Equity closed in losses.
  • Stocks set to further widen gains in 2020

The ZSE main board, on which 59 counters are listed and 52 actively traded, recorded a weekly gain in the second week of the year, maintaining rallying momentum since the first week of the year. Cumulatively the ZSE is up 2.5% earned over 7 sessions with the latest weekly gain doubling that of the prior week.

In 2019, the ZSE added 53% over the 12 months period completing 4 straight years of gains. Gains accrued over 2019 were largely attributed to hedge-seeking and value preservation in the face  of high inflation and exchange rate losses. Inflation went up by 380 % over the 12 months period while the exchange rate weakened by 86% since liberalisation in February.

All stocks with the exception  of 2 recorded yearly gains with risers being led by stocks with export earnings exposure. Out of the best 12 performers, 8 were direct or indirect foreign currency earners. Value counters ranked below foreign currency earners largely due to the change in currency effect, which immediately raised RTGS earnings of the respective foreign currency earning companies.

While inflation levels are expected to subside and fundamentals weaken further, it is likely that investors will have higher appetite for stocks ahead of other competing asset classes. Properties will likely see improved supply after a generally quiet market in 2019. Yields are however likely to remain subdued in property owing to the projected economic backslide.

We expect value stocks, such as Econet, Natfoods, BAT and Seedco to continue driving the market up in 2020. Although we note the weakening earnings in real terms and the dearth in demand across most sectors, we believe that the sharp plunging exchange rate and inflation are key drivers for further market correction upwards.

Respect Gwenzi

Respect is the Lead Analyst and Managing Director at Equity Axis. He has 8 years experience in respective fields of finance and media. Particular areas of expertise include Asset Management, Stockbroking and Financial Media. Respect is on a mission to change the course of Financial Media in Africa through digitalization

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