Will the GOOD news lift Investor spirits?

It is not often that you get so much good news in one day on the ZSE. Monday saw a comeback by KMAL (to be known as Meikles Limited going foward after a name change was proposed)on the local bourse, after months of uncertainty. PPC became a fully fungible share, joining OLD MUTUAL . (For those not in the picture, you can now sell your PPC shares if you meet certain conditions on the JSE) Why is this so important? Well PPC on the ZSE is trading at a price nearly half that of the JSE price. No prizes guessing what will happen to the ZSE PPC’s in the next few days if not hours!

You will recall last week that we pointed out that all is not well on the ZSE at the momement. Well, aside from the good news on KMAL and PPC, there is very little else to excite pensive investors. For companies looking to raise money, it is even worse. You can buy the whole of Star Africa for a lowly $25m. They are raising $20 million from the market. This is just one example.

What is happening to our listed companies? I wish i had all the answers. Zimbabwe's listed companies are valued at a collective $4bn. Less than 10 companies account for 80% of this value. In my view the market should be at least double this value. The dillemma facing many company executives today is whether to raise money and risk massive dilution or continue the way things are and risk closure. Most have done the sensible thing, dilute and move foward.


For instance brick and mortar used to be very popular during the heydays of inflation. Investors have largely discounted properties. A look at the market capitalisation of property companies, Pearl ($25m), Mash ($23m), Dawn ($33m)and ZPI ($9m),shows that these companies are cheap. When the economy starts growing, rental yields and property values are expected to rise and infact have started to. Limited development of new sites and a shortage of space has seen rentals double in recent weeks.

My take on the ZSE is that, shares are looking cheap but sentiment is bad so prices wont rise in the short-term. There is also a wait and see mood that has gripped the market. Sadly this means that prices will not move anytime soon, except ofcourse if there is some good news on the GPA front as well as other policy news. As the tobacco selling season wears on expect improved liquidity, which can only push up demand in the economy at large. Investors with money to spend are best advised to take advantage of the market weakness, before improved liqudity hits the market.