CONSUMER-FACING industries listed on the Zimbabwe Stock Exchange and companies that will show resilience to the Covid-19 economic shocks will emerge as the most preferred stocks for investors, analysts have said.
Zimbabwe and most countries in the region are battling to contain the second wave of the coronavirus with experts warning that lower-than-expected economic growth may be achieved.”
According to the World Bank’s flagship report titled Global Economic Prospects, Zimbabwe’s economy contracted by 10% last year, against the government’s projections of -4.1%.
Next year, Zimbabwe’s economy will grow by 3.1%, the World Bank projected. Despite experiencing turbulence following some regulatory interventions, the local bourse surprised several pundits in the first three quarters of 2020 which saw both the industrial and mining indices outperforming a majority if not all other market indices on the continent.
Econometer Global Capital, a local research unit, expressed guarded optimism regarding the ZSE outlook.
“Getting into 2021, we remain bullish about defensive stocks with exporting counters expected to outperform forecast inflation for the year,” Econometer said in a research note.
“The pessimism regarding resumption of active trading on the money market continues giving an advantage to the equities market. The bourse shall remain decoupled from developments on the real economy in particular whilst retaining some features of a barometer towards the financial sector and the external sector. A number of counters remain undervalued, chief among them is Cassava Smartech which was generally one of the worst-performing stocks in 2020. Going forward, Cassava, FMCG (fast-moving consumer goods) stocks as well as mining stocks remain a buy.”
Despite making these bullish sentiments, the research firm said foreign investors on the equities market will remain subdued.
“We also do not expect any new listing for the year 2021 with the Victoria Stock Exchange remaining a subdued shadow exchange. The market will remain unattractive to foreign investors with negligent capital raises expected, especially rights issues. Foreign participation on the ZSE shall also be depressed, averaging 20-25% in 2021,” the research note reads.
“With the Mnangagwa administration confronting the land barons head-on, a subdued performance is expected in the construction sector which will to an extent bring tail winds to the local bourse, fueled by domestic investors.
“This leaves stocks such as Cassava, Dairibord, Axia, Simbisa, Delta, Ok Zim, FBC, Old Mutual, Padenga and Seed Co as our topic 10 picks for 2021 regardless of them being heavily undervalued.”
Batanai Matika, head of eesearch at brokerage firm Morgan & Co, said stocks that are resilient to the aftershocks of Covid-19 pandemic would be good buys.
“Covid-19 is real and a lot is happening on the exchange. Apart from stocks that will be resilient to the shocks, developments relating to stocks that the National Social Security Authority will also be interesting.”