What does the year 2012 have in store for us now that 2011 is behind us? Here are a few important stats to help us understand what the year 2011 was all about. The ZSE’s main industrial index closed in the red down 3.6%. Inflation was on the up and but was expected to be more or less contained by the end of the year.(lower than 4.5%) Money market investment rates were around 10-15% per annum as the credit crunch took centre stage.
These figures do little justice in showing what really happened in 2011. Following a lull in the implementation of the GPA, the economy seemed to stall but this was not evident in the numbers that listed companies continued to release. In fact production rose resulting in a number of our local companies operating two shifts to increase operating capacity. This did not bring much cheer to investors who appeared unmoved by these impressive numbers.The stock market lost value as investors simply ignored valuations.
What was their focus? Politics, politics and more politics! It wasn’t just about Zimbabwean politics it was about European politics and West Africa you name it! Anything to blame the lack of confidence on! The debt crisis and unrest in parts of Africa played havoc on investor expectations damaging confidence. Investors questioned the world order and wondered when and how the chaos would end. There were and still are few answers to these questions.You take your pick. The answer is the same. There is so much uncertainty in our world today and unfortunately markets require some sort of certainty to move, anything, something, to clutch on and support that investment decision.
There are very few signs that we are anywhere near finding an answer to the World Economic Crisis that has engulfed us. Turn on CNBC, Bloomberg, read the Wall street Journal, the Herald, the Financial Gazette, the story is the same. There is very little confidence in the current financial order.
But one thing is certain, the Zimbabwean economy is growing and that is one fact that no one can dispute. This is one positive that we are carrying into 2012 and one that gives me enough confidence to say that the ZSE is very much undervalued. We are talking about a market that has an average dividend yield of nearly 4% and an average P/E ratio of 6.75 times.
Having been away from the market for the last four weeks, I am shocked at the stock prices that I am seeing on the market for some quality stocks. Forget the traditional “Econet is cheap!" talk. I am talking about Astra at 1.5c, Old Mutual at $1.25 (when did Old Mutual last trade at a P/E of 5.6 times and a dividend yield of nearly 5%, SERIOUSLY!!). These valuations make no sense to me at all. When you look at the numbers from Old Mutual and a number of other listed companies there is lots of value in these counters, yet they remain irrelevant to what is going on now. Things have changed, haven’t they? There was a time when all you needed were numbers to support an investment decision. Those days appear to be long gone now and we all need something more.
That something is proving elusive to many. The following chart is a summary of my thoughts on the year 2012!
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