Banks bullish despite market losses

HARARE - The week saw massive profit taking across the board weigh down the performance of the market. The self-perpetuating effect of the stock market saw massive losses being recorded mid-week. As the week drew to a close, investors had reached a stalemate in which sellers were holding back as

they considered themselves to have missed out on higher prices while buyers still considered it to be premature to enter the market, as it still appeared expensive.

Some recovery was recorded on Friday though we do not think this signals the recovery of the entire market. The market could be on a false bottom in which prices will appear to be rising before they begin to fall soon afterwards. This would be so as the investors who missed the opportunity to sell their stocks on the way down have lost some faith in the market and are watching the prices closely such that any opportunity they get to exit at a reasonable price will be exercised.

Meanwhile buyers will quickly hold back if prices begin to rise. This implies that in the coming week the market could chart a pennant formation in which the short-term support level will be continuously rising while the short-term resistance level will be falling.

A breakout at the support level together with information on the January inflation figure, which we expect to be no less than 670%, could lead to another bull run on stocks within the next 14 days.

However the bull-run will be on selected stocks as December results should begin trickling in at about the same time. In these results most companies are not expected to outperform the December year on year inflation of 5.85% though they should comfortably surpass the average inflation. This will lead to some PE ratios being ridiculously high on a historical basis.

The week saw only 18 gains being recorded against 44 declines. At the top spot in the week was ZIMPAPERS and HIPPO which each gained 40% to close the week at $1400 and $56000 respectively.

The stocks are trading on a forward PE of 16 and 6 respectively, which is reasonable. Transportation and logistics stock PIONEER put on 37% to $1300. The banks continued to rise despite a fall on the market on the overall.

FINHOLD gained 36% to close on an impressive $49,000, KINGDOM advanced 34% to $9000 while ABCH put on 15% to $39,000. CBZH, which had been bullish over the weeks, lost 18% to $14,000.

Other counters to gain included CHEMCO, which advanced 28% to $115,000, and ART, which gained 18% to $13,000. OLD MUTUAL put on 12% to close the week at $670,000.

The Old Mutual implied rate (OMIR) now stands at $196,000 to the greenback and this is a leading indicator on the valuation of the local currency. Leading the losses in the week was hotelier group RTG that lost 33% to $1000.

The stock had recorded massive advances in the previous week following on the heels of ZIMSUN. The group is still to re-brand its flagship hotel, the Sheraton with only a month remaining. Tractive lost 32% to $8800 while construction company M&R lost 29%.

Post published in: Economy

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