Increased political risk in the fourth quarter of this year is likely to weigh on investor sentiment as political parties ease into election mode — ahead of elections likely to be held next year — according to research findings by Interfin Securities.
Interfin Securities noted in its third quarter review of the equities market, that there was a strong possibility the implementation of the Indigenisation and Empowerment Act could be used as an electioneering tool. That is likely to have an adverse impact on the economy.
The report said locally, individual and institutional investors traditionally crystallise their positions ahead of the festive season, and this will be another negative for the equities market.
Interfin Securities said the 2012 National Budget, though likely to be pro-growth, is likely to be constrained by rising expenditure as preparations for elections heat up and may fail to be a catalyst for the equities market.
“We maintain our view that investors should consider defensive stocks in their portfolios, as these will be driven by the year-end 13th cheque increasing consumer spending which will improve retail revenues,” reads part of the report.
The report noted there was likely to be value in retail-driven businesses like Innscor, OK Zim, Edgars, TNH and Delta.
“We also favour agro-industrial counters such as Aico, Hippo, TSL and Zimplow which are looking highly undervalued at current levels, but with strong fundamentals especially the potential recovery in the agricultural sector.
We also like ABCH and CBZH in the financials space whilst other stocks to consider are Pearl, Turnall and Hwange.
The report said going into the fourth quarter, uncertainty will remain high largely as result of policy makers’ decisions on the global economy still hanging in the balance.
“From a global perspective the recent moves by the eurozone policymakers to inject liquidity in most of its member countries will, if implemented allay fears regarding a financial crisis.
We still maintain that emerging countries will continue to drive global growth in Q4:11 relative to developed economies,” reads part of the report.