Equities rally remains strong….
The holiday shortened week had little economic and business developments to write home about, besides the usual deafening political noise which has now reached fever pitch levels ahead of next year’s elections. Given the stock market rally one is persuaded to believe that investors are turning a blind eye on fundamentals at both macro and micro levels. The stock market closed the week with a gain of over 1% driven by mid to low cap gains. The ZSE industrials is up by 47% year to date and over 40 stocks out of the overall active counters are trading ahead of their year opening levels. But the earlier persuasion is not entirely without a downside, investors have less room to maneuver in terms of alternative asset classes and an appreciation that money management is about risk managing and not risk elimination is required. A less active and perennial loss maker penny stock Medtech was the week’s top mover which shows the gradual shrinkage of opportunities on the bourse. Banking stocks Barclays and ZB, which released their interims in the prior week featured among the risers. Dairibord which significantly trimmed its loss position in the half year period received a deserved market cheer rising week on week. this shows a minimal inclination to fundamentals in the market. In the coming weeks a number of listed companies are expected to release their earnings for the half year period.
Inflation trends southwards…..
The ZIMSTAT released inflation numbers for the month of July during the week and the outturn was negative. Year on year overall inflation came off to 0.14% down from 0.31% in June. The outturn was weighed by a dearth in non food inflation which entrenched in the deflationary territory as the cost of amenities and housing tumbled. Food inflation remained positive although we expect it to taper off given the increase in raw material supply. An ensuing improved demand is expected which may minimally positively impact on inflation in the near term. The RBZ is targeting an inflation rate of 2% by year end in line with the IFIs target. We believe the cost of cash will effectively drive the unofficial inflation position further up to levels above 10% and the mid-term impact may be hyperinflation. A correction of the current cash crisis should be a government priority and the immediate focus should be reigning of expenditure to sustainable levels which is an endogenous matter.
Turnall plots another comeback…
In company updates Turnall reported that volumes year to date, were significantly improved, the company however said the last 2 months between June and July saw saw revenue ticking up by 10%. Turnall said the first half was more depressed owing to a tightening business environment but that fortunes have since turned in the second half as the company now operates with an enhanced cashflow level. management anticipates a turnaround by year end. Mobile operator NetOne is widening its tentancles, giving market leaders Econet a run for its money and this week the operator unveiled 2 micro products that will push sales organically and through diversification. NetOne unveiled the OneTech and OneCover products which will facilitate the purchase of smartphones and complimentary data and voice packages and a micro mobile funeral cover respectively. Econet likewise recently rolled out a facility which allows civil servants to purchase gadgets at zero deposit and these also come with complimentary voice and data.
