When will it end?

y w:st=”on”>HARARE – The stock market continued to plummet, as the money market rates remained firm on the back of acute shortages. The 91-day Treasury bill rate remained at 499% while the market position was short on all of the five days.

The shortages, which caught banks unawares two weeks ago, were compounded by the rise in statutory reserves to 55% of deposits. Share prices failed to respond to even the exceptional results reported by some companies. A few investors were already beginning to take the conscious decision to take their losses or little of the profit left on the stock market and hope to compensate for the loss on the money market where some desperate institutions were offering investment rates close to 600%.

The question that many are beginning to ask is when will it all end. The RBZ managed to mop up close to $9 trillion in the month of February alone at an average rate 460%.

This means that in May this year there will be maturities of close to $20 trillion from this very money (excluding other maturities). At that point the RBZ can either decide to mop up the maturities again and defer their problem until three months later or they may choose to roll over the maturities to anything between six months to five years. This will leave banks with a massive mismatch between their assets and liabilities and may cause serious liquidity problems. This will not be anything new as a similar measure was used in 2004.

The other alternative at maturity of the treasury bills will be to let the market remain in surplus. This will lead to interest rates plunging and money returning to the stock market. What is clear is that the current situation is not sustainable and thus we might not have to wait until May before the situation snaps.

The week saw a total of 52 declines against only nine gains. The top gain in the industrials was TEDCO, which put on a marginal 10% to close the week at $2200. The other gains were CHEMCO, STEELNET, NTS, PELHAMS, DZL, TRUWORTHS and OLD MUTUAL. The top losses were led by INTERFRESH, which slumped 52% following the announcement of its weak December finals. HIPPO lost 47% to $25,000, RTG retreated 42% to $700 while ART and CBZH each lost 41% to close at $5,000 and $9,500 respectively. Other top losses included OK, WILLDALE, FBCH, DAWN and CELSYS.

In minings, gains in RIO TINTO led to the index advancing 9%. The stock gained 42% to $850,000 following the publication of its exceptional results. The company recorded an increase in Gold, Nickel and Diamonds produced.

However it expects a lower diamond production in 2006 due to the exhaustion of the richer surface ore. HALOGEN and FALGOLD were unchanged while BINDURA lost 13% to $35,000 and HWANGE slipped 22% to $18,000.