Sunday, 16 October 2016

BOND NOTES SHAKE STOCK EXCHANGE

THE Zimbabwe Stock Exchange touched a nine-month high last week as investors shifted portfolios from money markets to equities with analysts saying this was a hedge against any shocks that might be associated with the imminent launch of bond notes.

On Thursday, the mainstream industrial index rose 2,7 percent to hit a nine-month high of 108,05 points, driven by Econet’s 19,3 percent jump to USc25. Other heavyweight counters also gained. For the week ended October 7, 2016, industrials had gained 2,15 percent to close at 101,1 points as the index completed a five-day rally. Gains recorded by heavy caps also spread to mid-tier stocks towards the end of the week in review.

The index had last traded above the psychological 100-point mark on July 13. Mr Respect Gwenzi, MD and analyst at Equity Axis, told The Sunday Mail Business that the market was “pricing the possible currency risk that might impact on their money market investments”.

“Fund managers are pricing the possible currency risk that may impact their money market investments given that these investments will simultaneously carry a bond notes equivalent value,” said Mr Gwenzi.

Reserve Bank of Zimbabwe Governor Dr John Mangudya has said the market should not be worried about the introduction of bond notes as their value was pegged to the US dollar.

Despite this, analysts say the “surrogate currency” might be discounted by currency traders – most of them in the informal sector – if it was not easily convertible to other currencies.

Bond notes are expected to have a duel function: to stimulate production as an incentive to producers and to deal with the physical money shortages presently affecting the local economy.
In May, the central bank announced a five percent export incentive that will be paid in the form of bond notes. The five percent incentive will accrue to small-scale gold producers and tobacco exporters.

Primary exporters will be entitled to a two percent incentive. Much of the portfolio investments on the stock market are in part targeting property counters. In the week ending October 7, more than 24,8 million shares changed hands in a single trade.

“There is a market-wide upwards shift in demand which now stretches eight straight sessions and the demand in property counters is part of the tide,” said Mr Gwenzi.
“Historically, property counters have on the average moved solid blocks of shares ahead of other sectors. It is largely the view of most foreign investors that local property counters trade at a discount . . .

“It is, however, our opinion that sudden boon in equities, which is not limited to property counters per se but the overall market and signifies an underlying shift in portfolio exposures between asset classes.”

Until September, property counters were hard-hit by low trades with all four listed property stocks – Dawn, Pearl, Mashonaland and ZPI – trailing their year opening levels.
Dawn is down -20 percent, Pearl -34,8 percent, Mashonaland -25,5 percent and ZPI -31,6 percent. In the first half of 2016, almost all property companies reported declining revenues as the illiquid conditions on the market continued.

Overall, the property sector’s performance was impacted by low occupancies, increased voids and reduced average rentals resulting in low yields. sunday mail

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