‘ZSE a safe haven for investors in 2020’


THE Zimbabwe Stock Exchange (ZSE) will recover this year as valuation mismatches on stocks brought by the de-dollarisation of the economy are corrected, a latest report has said.

In their 2020 market outlook analysis, Fincent securities said stocks were seen gaining this year despite liquidity challenges constraining the markets as investors relook at the earnings potential of listed firms.

“With the economic outlook negative, it follows that return prospects for key asset classes are also depressed. After suffering massive losses in 2019 equities are expected to bounce back in 2020 as valuations mismatches, get corrected.

“We expect acceleration in money supply growth because of many funding demands on government, which will add impetus to inflationary pressures forcing investors to buy equities for their traditional value preservation qualities,” the securities firm said.

Analysts say stocks on the ZSE will find momentum from the revaluation with fund managers taking positions after analysing companies’ earnings potential and valuations going forward.

This, is likely going to create some upside for shares currently in the red after the introduction of Real Time Gross Settlement dollars and separation of US dollars from the quasi-currency last year.

“Foreign activity from existing investors will be minimal in 2020, which affects price discovery, but it also creates an opportunity for another class of investors attracted by the low valuations. The market should see an introduction of new products like exchange-traded fund (ETFs), derivatives and real estate investment trust (REITs) that could add some excitement and interest,” said Fincent.

Fincent said the adoption of the Global Industry Classification Standard in January this year wasa positive development, which should make global comparisons meaningful and improves benchmarking whilst providing an opportunity for style-based investing.

“Our recommendation on the ZSE is a strong buy with careful stock selection being critical as not everything looks attractive,” the securities firm said.

Fincent securities said factors that, however, could affect equities this year were macroeconomic factors, corporate earnings, valuations, investor sentiment, diversification of capital markets, new products and new listing.

The securities firm listed Simbisa Brands as a top pick on the ZSE under consumer discretionary counters.
On consumers staples companies Fincent recommended Delta Corporation, National Foods, OK Zimbabwe and British American Tobacco (BAT).

“With the economy largely expected to shrink further, only producers of basics, (National Foods) common daily products which are difficult to forego (beer-Delta and cigarettes — BAT) and retailers of such (OK Zimbabwe) have a fighting chance although volumes will still be depressed.

“More than any fundamental reasons, an overweight on this sector is justified because these are bell-weather stocks which are looking very cheaper compared to historical US dollar valuation,” said Fincent.

The company also recommended CBZ Holdings and FBC Holdings under the financial services sector, Cassava SmarTech under technology and SeedCo and Art Corporation which are classified under materials.

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