NEDPP target a mirage as forex market slumps

NEDPP target a mirage as forex market slumps

HARARE - The stock market closed last week on a firm note as the market was driven by gains in Old Mutual and Pretoria Portland Cement (PPC). The rest of the market continued to experience mixed trading but the two counters mas

ked the effect and this saw the industrial index putting on 7.2%.

The gain in the counters was driven by the 37% plunge in the parallel rate hardy a month after another 37% slump. With the NEDPP target of raising US$2.5 billion within the remaining 30 days fast becoming a mirage and this having been the barrier between the fair pricing of the currency in relation to developments on the inflation front over the last three months, the collapse was inevitable.

Speculative buying became rampant over the last month as the Greenback had effectively become cheap within Zimbabwe using purchasing power parity. The maturities on the money market had also released some funds into the market that would either find its way back on the money market or alternatives such as the stock market.
With the performance of the stock market having been stifled this year the forex market became the only viable option. Other significant changes that occurred during the week were the scrapping of the 2-year treasury bills, the introduction of 30-day, 0% treasury bills and the reduction in statutory reserves.

The statutory reserves for banking institutions were reduced to 50% from 60%. The 10% however was not returned to the market but put into 1-year CPI-linked bonds. The punitive two-year Treasury bills closed at a rate of 375% before being scrapped. The form of penalising would become a 30-day Treasury bill at 0%.

The moves are unlikely to significantly improve the current liquidity position of the market but could indicate that the RBZ is becoming softer on its tight liquidity control measures as we approach the mid-term monetary and fiscal review statements due next month.

The top gain of the week was NMB, which gained 38% to $1800. The gain could be simply repricing or maybe the bank could have had some financial fortunes following the change in statutory reserves and the scrapping of the two-year paper.

KINGDOM also put on 35% as the curtains came down on the rights offer. The results of the rights offer are to be published on Friday and they should be quite interesting. Also interesting to note is that the current CEO of KFHL will be reassigned into the regional operations.

COLCOM, which had stagnated over the last 5-months, gained 30% to $26,000. PPC put on 29% to $15.5 million while Old Mutual gained 28% to $900,000. The OM Implied Rate moved to $308,298.76/USD and thus there still is some upside.

FML put on 21% following the hotly disputed AGM and closed the week at the psychological level of $2000. TANGANDA advanced 21% to $40,000 following the publication of its interim results.

The top loss was PGI which was retracing back after a leap in the previous week. The stock shed 33% to $10,000. PIONEER also shed 33% to $1000. MEDTECH and BARCLAYS were quoted 21% weaker at $300 and $2300 respectively.

In minings, RIO ZIM held its 2 for 1 bonus issue. As anticipated given the inefficiency of the local market, the ex-bonus issue price was at a premium to the pre-bonus issue price. As a result the stock put on 30% to $475,000 ($1,425,000 pre-bonus issue). The movement carried the mining index as the other mining counters were either unchanged or quoted weaker.


Post published in: Economy

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