Paul Nyakazeya, Group Digital Editor Full-year financial results to December 31, 2012, showed that most manufacturing companies faced difficulties in accessing capital, while those that remained strong had to contend with a shrinking consumer base.
Traditionally, before annual corporate results are released, investors take positions in those stocks with the potential to report strong earnings.
This usually triggers increased activity on the stock market, driving share prices and demand by foreign and local investors.
The situation has changed as the liquidity strife continued to punish the market, leading to fatigue on the ZSE.
Some influential players on the market, especially insurance companies, have been concentrating on meeting their minimum capital requirements instead of growing their portfolios.
Consequently, the flurry of financial results seen recently has failed to generate excitement on the stock market.
Brains Muchemwa, chief executive at Oxlink Capital, told The Financial Gazette’s Companies & Markets that a closer look at most of the companies that posted losses exposed their inability to manage costs and poor leadership.
He said poor leaders were holding on to irrelevant business models.
“Equally evident is the fact that most of these struggling companies are in this situation because of poor judgment that resulted in huge debts on their balance sheets in the hope of turning around their fortunes,” said Muchemwa.
To stay afloat, most companies are preoccupied with cutting costs through such actions as retrenchments.
While the extent of job cuts could not be ascertained due to lack of up-to-date data, this act alone has failed to inspire investor confidence.
The ZSE has been driven by foreign investors whose participation rose from 23 percent in 2010 to 36 percent in 2011 and 41 percent last year.
Equities firm, IH Securities, said the contribution of foreign turnover against total turnover on the ZSE continued to move upwards.
“We retain our position that these figures continue to be severely understated and believe that the contribution of foreign turnover is significantly higher given the clear dearth in local liquidity,” said the firm.
Generally, individual investors have been hindered from participating on the ZSE by the lack of liquidity.
There are also a few sellers on the market as the majority of institutional investors are holding on to equity investments for the long-term.
“Most companies are not making profits and not declaring dividends and at the same time there are not many sellers offering shares to the market. This results in a subdued market,” said economist, John Robertson.
A report on the state of the economy released by the Minister of Finance Tendai Biti last week did not do much to lift investor sentiment. He indicated that Zimbabwe’s economy was still facing a plethora of problems.
On Wednesday, the equities market recovered from its recent losses ahead of the Independence Day holiday.
Trading was, however, still subdued with just above US$500 000 being invested compared with the daily average of US$1,5 million before the holiday.
The industrial index closed 0,33 percent positive at 188,65 points while the mining index added 1,22 percent to close at 67,17 points.
On Friday, ZSE shares closed flat in mixed trading although turnover was just within the daily average at US$1,56 million.
Foreign buyers amounted to US$1 million and sales of US$546 000 were achieved.
The industrials index was down 0,01 percent to 188,63 points and the mining index was steady at 67,17 points at the close of trading.
