eBusiness Weekly
Kudzanai Sharara
Stocks trended southwards for the week ending Wednesday 27 February 2018 as markets recognised that premiums over real value to preserve some value in instability could be lowered in light of recent reforms.
The period covers the first five trading days post the 2019 Monetary Policy Statement announced by RBZ governor Dr John Mangudya.
The monetary policy was pregnant with sweeping changes to the foreign currency exchange rate, glued at 1:1 since the multicurrency system was introduced back in 2016.
Despite insistence by monetary authorities, the 1:1 exchange rate was, however, at most a fallacy, as the US dollar continued to trade at a premium to both the bond note and the RTGS balances.
The RBZ has finally admitted the unsustainability of its continued use of a 1:1 exchange rate, saying in the MPS that “this movement in forex premiums has had negative pass-through effects on inflation which increased particularly from the September year-on-year level of 5,4 percent to 20,9 percent in October and closed the year at 42.09 percent.
“The current monetary arrangements, if maintained, could pose the risk of a costly re-dollarisation of the economy which will move the economy into a recession,” noted Dr Mangudya.
“Introduction of a market determined mechanism for trading of US dollars with RTGS balances and bond notes has become imperative,” he added.
The correction of the exchange rate, through the introduction of an interbank foreign exchange market, according to analysts, has been greeted by stock market investors as an opportunity to liquidate portfolios and channel the funds towards the purchase of raw materials.
The new MPS prioritises the importation of raw materials or machinery aimed to generating exports or production of import substitution products. It also prioritises payment of capital disinvestments, profits and dividens.
Since the MPS announcement, the main Industrials Index had lost 1,85 percent by close of trading on Wednesday 27 February.
The ZSE All Share Index also came off by 1,92 percent, the Top 10 index by 2,24 percent, while the Mining Index was the biggest loser dropping 4,93 percent.
Total market capitalisation also shed 1,7 percent to $19,8 billion.
Most of the losses were in blue chip stocks with Old Mutual the most notable loser down 18,48 percent to 750.3 cents although it’s still trading at a 350 percent premium to the share price on the JSE.
Delta shed 3,85 percent to 279,91 cents while Padenga lost 5,66 percent to 100 cents.
In mining, Bindura dropped 15,77 percent to 7,21 cents. The market was however not short of risers with Unifreight leading the risers up 20 percent to 8,28 cents.
Afdis followed with an 8,88 percent gain to 170 cents Afdis recently reported its results for the six months to December 2018 showing a 157 percent jump in profit to $7 million $2,7 million in the same period in the prior year and 34 percent ahead of full year profit.
Profit before tax came in at $9,7 million representing a 157 percent growth while operating income increased 130 percent to $9,3 million.
Earnings per share grew 155 percent to 6,08 cents. Afdis attributed the growth to increase in volumes.
