Stock market over-valued

wever the net movement was negative. This movement comes on the back of a general loss in confidence on the stock market’s performance in the outlook for 2006 and the firming interest rates on the money market. The stock market has had a sluggish year so far and there is evidence that it should continue to be frustrated in the near future.
However other investors have used the depressed prices as opportunities for accumulating. Despite this view not being time bound due to uncertainty, it is evident that when it does it will on average compensate investors for their patience. We attempted to look into some underlying reasons why investors are not simply ignoring the spurious noises and simply buy stocks.

One underlying reason could be that over 2/3rds of the market has outperformed year on year inflation. If the declining sales volumes are taken into account the stock market appears currently overvalued. Thus there is no appetite to buy into forward performances, as they are a little dodgy.

However as prices align themselves to inflation, the upcoming set of results will result in the market trading at very low PE ratios and only then will the market become evidently undervalued and at that point all efforts to frustrate the performance of the stock market will be ignored and we could experience a short and sharp bull run that is only likely to benefit those already in the market as the market corrects itself. 

At that point stocks that have shown a significant potential to growing their earnings should be re-rated. Such stocks should include ZSR, ZIMPLOW, ART, COTTCO and GENBELT and thus we recommend investors to accumulate these stocks.

The industrial index was weaker after losing over 5% as there was a net outflow of funds on the stock market which was switching to the money market were rates were firm in the first half of the week.

The top gain of the week was HWANGE, which put on a massive 47% to $22500. GULLIVER put on 44% to $7200. This was probably not driven by the lukewarm results but possibly that the stock is trading under a cautionary.

KINGDOM which set its rights offer price to $5900 was still attempting to reach such a level for the transaction to make any sense.

Other stocks amongst the top gains were DELTA, MEIKLES and PPC. The top loss of the week was CFX which plunged 49% to $515 as the stock still tries to find its level. Other top losses were TRACTIVE, DZL and FBCH. The total advances to declines ratio in the week was 15 to 48.