Stock market plummets

'The week saw a total of 45 counters recording declines'



HARARE – The bearish market which was experienced over the last 14 days finally gave in and led to the stock market plummeting to a 30-day low. The poor performance saw the total market capitalisation falling to below $400 trillion.

The short-term support of 40 million points for the industrial index was broken early in the week resulting in the index reaching 34.2 million points by Wednesday. The burst was exacerbated by the 91-day Treasury bills, which were introduced into the market on Monday. The bills closed the week on an average yield of 499%.

The RBZ aggressively allotted the treasury bills on all days in a measure taken to mop up all the liquidity from maturities. The market closed short on all days, resulting in interest rates firming.

Expectations were that the RBZ would possibly maintain this position until the introduction of primary dealers. However the plans to introduce the primary dealers was shelved. This becomes the latest plan to be shelved following the shelving of the proposed new currency.

The statutory reserves were increased to 55% of deposits. This implies that whereas banks are obtaining seemingly lucrative interest rates, they are unable to pass them on to investors as over half the deposits mobilised to buy the instruments are placed with the RBZ at 0%.

Thus the effective yield realised by banks is grossly diluted resulting in them offering investment rates that are relatively low. The realisation of this by speculators who had vacated the stock market led to a rapid recovery being recorded in the later parts of the week.

By Friday the market had gained some significant ground when compared to the bloodbath that had occurred earlier in the week. We expect that the stock market will continue to firm in the week ahead though a few cases of early profit taking could occur. This will mainly be the result of sceptic speculators who missed the opportunity to sell their shares before the bloodbath and hence they now have reduced faith in the stock market.  

The week saw a total of 45 counters recording declines while only 15 were marginally upwards. Amongst the industrial counters the top gain of the week was WILLDALE, which put on 30% to $390. RTG put on 20% to $1200 while BORDER advanced 18% to $20,000.

 Tech stock Celsys, which reported profitable results in the week, gained 16% to $441. CBZH, BARCLAYS, FML, MEDTECH and TRUWORTHS were also quoted firmer in anticipation of upcoming December results.

Amongst the declines was APEX, which took a 30% knock to $1800. TANGANDA and HUNYANI each shed 29% to $32,000 and $10,000 respectively. ZSR ad TURNALL each eased 26% to $10,000 and $3200 respectively. Other losses above 20% included DZL, ART, SEEDCO, INTERFRESH and TEDCO.

In minings HALOGEN gained 150% to close the week at $550,000. The company remains a shell that is holding onto a cash pile of £2 million. The movement of the stock is closely correlated to the company’s NAV and the parallel market exchange rate. HWANGE gained a marginal 5% to $23,000.

FALGOLD and BINDURA were unchanged at $14000 and $40000 while RIO TINTO traded 8% weaker at $600,000.

Post published in: Economy

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