Banks to underpin fine year for ZSE investors

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BY MTHANDAZO NYONI

RESEARCHERS at one of Zimbabwe’s most respected investment advisories have tipped financial sector players to drive the Zimbabwe Stock Exchange (ZSE) this year.

Morgan&Co on Friday also gave thumbs up to investments into “defensive” food counters, saying these would be front-runners in unlocking returns for stock market enthusiasts.

It predicted that ZSE would remain one of the most reliable investment destinations in Zimbabwe, where risks have been amplified by hyperinflation and a volatile exchange rate.

According to its report titled Zimbabwe 2022 Economic Outlook; Assessing the Probable Outcomes, Morgan&Co said ability to make the best stock picks had become the most important factor for the ZSE, which it tipped to hit $2,9 trillion by year end.

The bourse continued its march towards the $2 trillion-dollar market capitalisation yesterday, after breaching the $1,7 trillion mark.

Morgan&Co said based on its analysis of the economy and sectoral metrics, the stock market would serve as an avenue to preserve value in 2022.

“We note that there are specific sectors that underperformed the general market in 2021 and are on undemanding metrics,” the report noted.

“In our view, the financial services sector remains attractive as we foresee potential upswing and corrections,” the researchers said.

“The stock market has been able to effectively track exchange rate movements. We expect the ZSE to record some nominal gains in 2022.

“The ZSE market capitalisation is currently at $1,6 trillion (US$7,2 billion at an exchange rate of $225),” the report said.

“Assuming a year end exchange rate of $400 (US$1:$400) implies a closing market capitalisation of $2,9 trillion (+78% nominal growth). The fact that we do not expect the market to register significant gains in real terms implies that stock picking will be of paramount importance in 2022,” the report added.

Morgan&Co said exposure to its Multi-Sector Exchange Traded Fund (ETF) would be recommended, given that the fund was overweight in financials.

Morgan&Co said real estate or property remained predominantly a United States dollar asset in Zimbabwe, which presents liquidity constraints for medium-term investors.

“Cash and money market instruments are not the best option given that we expect deteriorating inflation fundamentals,” it said.

The researchers said yields on the money market remain subdued and below inflation levels.

“This leaves the stock market as the most feasible option to preserve value on Zimbabwean capital markets.

“Investors should park Zimbabwe dollar balances in selective counters on the stock market given the emerging inflationary pressures,” they said.

Last week, Datvest, said it was working on establishing a real estate investment trust (REITs) to be listed, after launching the Datvest modified consumer staples exchange traded fund (DMCSETF).

Datvest chairman Never Mhlanga said more products would be unveiled soon.

“For now we have done the ETF which is a very exciting product as you would know,” Mhlanga told NewsDay Business.

“Beyond this we are looking at real estate (to see) what extent we can deepen the markets. (We are) looking at what they are doing in other markets. We will launch a real estate investment trust (REIT), which will be listed on a stock exchange,” Mhlanga said.

The DMCSEFT becomes the third ETF in the country after Old Mutual unveiled an almost similar product in January last year.

Morgan&Co listed its multi-sector fund two months ago.