Money market rates firm

HARARE - The stock market continued to lose significant ground as further losses were recorded in a week that was characterised by firm rates on the money market. The effect of the rise in statutory reserves to 60% for retail deposit

s and 45% for wholesale deposits began to filter into the market on Monday and by day end the market was short about $3.8 trillion as opposed to the forecast of $5.6 trillion.

Hence the extent of the money market shortage was not as severe as anticipated. The main cause to this was probably the fact that most banks had managed their liquidity wisely and factored in the shortage hoping to capitalise from those other institutions that would be short. However almost half the large players adopted the strategy and thus it failed to achieve any competitive advantage.

The exchange rate remained pegged at $99,201.58. The volumes traded remained below US$5m a day.  The Greenback slipped in early trade on Monday as investors wait to see whether the Federal reserve would flag more credit tightening ahead after an expected interest rate rise at this week’s meeting. The Rand opened the week firmer after holding modest gains fuelled by the Dollar’s retreat.

Later in the week was the Q1 Tax QPD. This worsened the already frail money market position and led to further shortages as the week came to close. On Friday the market closed at $5 trillion short.

Looking ahead ceteris paribus the money market is expected to eventually return to a square position in the next 14 days as maturities are expected onto the market with a bulk $2.7 trillion maturing on April 4. Money market rates could begin to soften as the week progresses giving the stock market a lifeline.

The stock market, which fell to a two month low on Friday, is now trading at a reasonable PE of 31.9 and a forward PE of about 14 times. As May draws closer, when massive maturities are expected, now could be a strategic time to accumulate stocks that are trading at a discount to their “industry accepted” PE ratios, especially those which have announced strong December results and have an outlook which cannot be meddled into by sudden drastic policy shifts.

There is still uncertainty on what will become of the May maturities with investors taking positions depending on what they believe could happen. Some believe that the maturities will simply be allowed to flood the market while other predict that high-yielding Treasury bills will mop them up.

In the week’s movements were 17 advances and 38 declines. The gains were simply the result of oversold stocks regaining some marginal ground to return to a reasonable level. The top gain of the week was DAWN, which put on 23% to $1600. The company’s has the liberty of using aggressive revaluations of investment property to justify their price.

FBCH, which announced strong December full year results despite skipping a dividend payout, regained 22% to $5000. STEELNET put on 21% to $1450. Other top gains included ZIMRE, ART, APEX, COTTCO, FML and PELHAMS.

Leading the losers in the week was short-term insurer NICOZDIAMOND. The stock lost 44% to $500. The company, which announced its results a fortnight ago made a technical loss and then came in with a huge investment income emanating from property revaluations.

POWERSPEED shed 41% to $100. TRUWORTHS took a massive knock when it lost 41% and closed at $3750. The losses are attributed to the dreary outlook that was presented by the management. HUNYANI lost 32% to $7500 while FINHOLD took a trashing when it lost 30% to close the week at $16000.

In Minings only BINDURA and HWANGE were quoted weaker while the rest remained unchanged. 

Post published in: Economy

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