HARARE – Stock market investors are seen swinging towards fast moving consumer goods (FMCGs) stocks with capacity to ride out volatilities, while benefiting from election-related spending, according to a report by financial services giant, Old Mutual.
In its latest assessment, Old Mutual said while the start to the election season had been marred by sporadic violence between major political parties, there would be positive spinoffs from the plebiscite.
Elections are associated with high demand for printed regalia, entertainment, transport, fuel and food.
Listed counters operating in these sectors are expected to benefit from the March 26, 2022 by-elections coming in a week’s time, as well as general elections expected next year, Old Mutual said.
“Focus is on counters that can withstand inflationary pressures, and will benefit from election and national budget spending,” Old Mutual said.
It said continued tensions on the political front were a cause concern.
This came following the death of two people after attacks by rivals at a Citizens Coalition for Change rally in Kwekwe last month.
The ZSE has defied the tensions since January.
Market capitalisation on the ZSE inched closer to $2 trillion on Monday, after gaining 40% since the beginning of the year, according to official data.
The last time the ZSE entered the trillion dollar market capitalisation was during the final leg of the hyperinflationary crisis between 2007 and 2008, when volatilities decimated the domestic currency, triggering a flight from other investment options to the bourse.
Last week’s developments came as investors continued trooping back to the bourse to hedge against inflationary shocks following another extensive drabbing of the Zimbabwe dollar in the past year.
The currency has been buttered since February 2019, when government ended a decade-long multicurrency system introduced in 2009.
There have been fears that Zimbabwe could relapse to 2008 crisis levels, when carnage on the currency triggered ZSE’s collapse.
Such concerns gained traction in the past few weeks, after market watchers including Morgan & Co, predicted a bloodbath on the currency this year, with the Zimbabwe dollar projected to depreciate to US$1:$400 by December, from about US$1:$250 currently.
“Inflationary pressures to persist fuelled by imported inflation trickling down to fuel and food inflation, foreign currency shortages and increased spending,” Old Mutual added.
It painted a gloomy picture for the tobacco marketing season and the overall agricultural season, saying the tobacco marketing season, which commences at the end of March was expected to result in lower output given the unfavourable agricultural season.
“The tourism sector is expected to rebound amid risks of political tensions,” the company added.
Old Mutual also said foreign currency demand was expected to increase given rising inflation, which will create greater need to preserve value, coupled with imported inflation raising prices in USD terms.
This comes as the economy suffered huge foreign currency shortages that have seen players resorting to the parallel market.
Backlogs on the foreign currency auction continue to persist and there are calls for allocations for only existing amounts, added the financial services firm.