The stock market has failed to build on previous gains recorded at the end of the first quarter, as investors have all but retreated. Trading has become so unpredictable these days. The value of shares traded on the ZSE is ranging from less than $500k to $1500k per day. Meanwhile corporate actions have gained momentum on the market, with the last company to come out in search of new capital being NMB http://www.nmbz.co.zw/. Despite having faced a fair share of problems including frauds, NMB has remained a strong institution and has managed to retain some of good clients.
The company is seeking to get shareholder approval to raise $7.1m through a private share placement with African Century Financial Services Investments LLP. http://www.africancentury.co.uk. Zimbabwe’s banking laws require a commercial bank to have $12.5m as capital. The effective dilution to be suffered by current shareholders will be around 32%. Pretty high, but there is really no other option is there? The money must be raised or else sitting shareholders will be left with no business! The RBZ has been very clear on what will happen to banks that are undercapitalized.
So all in all, I think this is a good move by the NMB board. What is important going forward is to make sure that the bank does not lose money again through fraud (its pleasing though to see a significant amount of money that was lost through fraud was written back to the income statement in 2009). The new IT system will go a long way in plugging some of the loopholes no doubt! $1m is earmarked for the upgrade of IT systems and upgrades.
The first quarter of 2010 has come and gone. It was not an easy quarter for anyone in business it seems. Apart from liquidity problems, a lot of uncertainty was seen regarding the country’s future as parties to the GPA continued to negotiate. Investment markets appeared directionless and never really went anywhere. The industrial index was down 8.70% in Q1. Mining index was up 16%, as a result of gains in Rio Tinto,
Business conditions in the first quarter of 2010 were tough for most companies. The problem was not that companies were failing to sell products. They were failing to collect their money from the sales. This problem is being seen across many companies and is a mere reflection of the tight liquidity conditions in the country as a whole. It looks like we are in a bit of a depression. For business confidence to rise we must see a buildup of liquidity and a softening of lending rates across our banks.
When businesses sneeze the stock market chokes. Remember we are all in the stock market because we expect to get some returns. A disturbing trend being noted among a lot of companies is the scaling down of operations and tightening of trading terms. You either pay cash or you don’t get the product.
As we go into the second quarter, what can we expect? No-one really knows but its increasingly looking likely that there will be an improvement in activity. Commodity prices on the international markets are looking up with Palladium, Copper, Gold, Nickel and Oil showing strong gains.
In terms of corporate actions as already pointed out we will see more companies coming to shareholders. The more we see companies getting new capital from investors the better the confidence levels we have in our stock market. OK managed to get a subscription rate of 70.4% for its rights offer. The appetite for good investments is definitely still there
