Bank rate up to 700%

HARARE - The market traded flat over the last week with no meanin

gful gains or losses being recorded. The advance to declines ratio was constantly below 1. Inflation was reported to be a lukewarm 613% up from 585%, which was below most forecasts, which averaged 650%.

The performance of the market was also held back by the 122-day Treasury bills, which were floated thrice in the week. Though the average yield is way below inflation, the market seems to have been swayed into believing the instrument was attractive as witnessed by the over subscription in all tenders. Investors have evidently vacated the stock market for the money market.

The amount on offer however shows that the RBZ is not totally committed to mopping up huge sums of money at this rate and judging from the way the rate came down from the initial 331% to 314% and then finally 270%, the attractiveness of this instrument is likely to be short-lived.

Meanwhile a graveyard market has developed, in which those investors who are already in the market cannot get out, as there are no buyers while those who are outside the market do not want to get in. This type of market could change if the RBZ fails to mop up the liquidity expected from maturities expected on the money market starting this week.

The falling rate for the 120-day paper could also trigger an upward movement on the stock market. Investors could reach a point of submission and the market falls further as sellers will be only having the sole goal of just exiting the market at whatever cost.

The December interims and finals that are expected to begin trickling in this week could set a direction for the market. Meanwhile the secured bank rate has been hiked to 700%, which gives a direction on inflation expectations. 

The top gain of the week was RADAR, which gained 155% to $5100, spurred by the gains of its subsidiary Border. The stock remains a speculative BUY due to the overhang of the takeover bid by Franconian Zimbabwe Investments.

The second highest climber was BORDER, which advanced 31% to $17,000.  The closing bid price was $25,000. These illiquid stocks normally rise on bids and trade very rarely. ZIMSUN recovered from its losses over the last three weeks and put on 30% to $2600.

ASTRA was quoted 30% firmer at $13,000. Asbestos products manufacturer TURNALL gained 28% to $4300 while NMB gained 25% to $4000. We maintain that whereas NMB is returning to profitability it remains overvalued.

Post published in: Economy

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