ZSE forecast to be bullish

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THE Zimbabwe Stock Exchange (ZSE) is set to rise significantly in 2020 as inflation is expected to remain in the three-digit range, a research firm said.
The market has gained 67 percent this year, spurred by inflation, which is estimated to have spiralled to 440 percent by October, from 57 percent in January.
“In the outlook, we expect the market to rise significantly in 2020 as investors seek to hedge against inflation in order to preserve the real value of their money,” Invictus Securities (Invictus) said recently in a note.
“We expect increased market liquidity to spill over into aggressive equity purchasing.”
Given the poor business outlook, investors are expected to focus on companies that supply essentials, exporters and dual-listed stocks.
Invictus says it is, however, unlikely that equity earnings and share prices will keep pace with inflation.
“The All Share Index is up 67 percent as of Nov 2019, while prices are up over 400 percent…in real terms investors have lost money in 2019.
“Given limited investment options, however, the stock market remains attractive especially when compared to term deposit return ranging 0,22- 12 percent and the TBs’ return averaging 15 percent,” Invictus said.
It also comes as Zimbabwe’s economic operating environment is expected to remain difficult in 2020, with a modest upside GDP growth, driven by an expected recovery in the agriculture sector.
“Overally, output is expected to remain constrained by forex and fuel shortages and load-shedding. We expect inflation to remain in the three-digit range,” the equities firm said.
The central bank, however, sees inflation subsiding going forward.
“Year-on-year is telling us the past, but for policy perspective you want to look at month-on-month because it is a forward-looking indicator.
“We expect month-on-month inflation to go down to about 12 percent by end of December. We see it going down to about five percent by December 2020,” Kupukile Mlambo, the RBZ’s deputy governor said recently.
Still, company profits are being squeezed by escalating costs and sliding output as well as sales volumes, a trend, which Invictus says is likely to continue through the first half of 2020.
Most corporate trading updates for the six-months ending September 2019 reflect significant drop in sales volumes.

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