Financial Matters Monthly “Stimulating investment in Zimbabwe”
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Are these exciting times for fundamental investo
There is the old adage that says that “a rising tide lifts all ships” (a saying co-opted by trickl economists but, as the changes in the current global equity market would suggest, a saying th be equally applicable in the case of equity markets). Last year’s global equity market saw sig gains for investors. Global equity markets were up, regional equity markets were up a Zimbabwean equity market rose higher than both. It appeared as though the good times (at equities were concerned) were back. Equity markets seemed to be on the rise everywhere, markets where underlying economic fundamentals did not appear to justify such rises.
However, the comparatively poor start to 2014 (see Figures 1 and 2) has started raising ques whether the strong performance was built on improving fundamentals after the global crisi turn of the decade, or rather, snowballing market sentiment that was moving money t equities (primarily fuelled by the relatively cheap money offered by global quantitative measures). The start of the year has been sobering for many investors across the world unexpectedly weak job numbers in the US were added to concerns of risk in Emerging M weaker production in China, a reduction in cheap money, concerns over Eurozone pro numbers and, more recently, the unfolding problems in the Ukraine. One could be forgiven seeing a bleak global picture at the moment.
Are these exciting times for fundamental investors? THERE is the old adage that says that “a rising tide lifts all ships” (a saying coopted by trickle down economists but, as the changes in the current global equity market would suggest, a saying that may be equally applicable in the case of equity markets). Last year’s global equity market saw significant gains for investors. Global equity markets were up, regional equity markets were up and the Zimbabwean equity market rose higher than both. It appeared as though the good times (at least as equities were concerned) were back. Equity markets seemed to be on the rise everywhere, even in markets where underlying economic fundamentals did not appear to justify such rises. However, the comparatively poor start to 2014 (see Figures 1 and 2) has started raising questions of whether the strong performance was built on improving fundamentals after the global crisis at the turn of the decade, or rather, snowballing market sentiment that was moving money towards equities (primarily fuelled by the relatively
cheap money offered by global quantitative easing measures). The start of the year has been sobering for many investors across the world as the unexpectedly weak job numbers in the US were added to concerns of risk in Emerging Markets, weaker production in China, a reduction in cheap money, concerns over Eurozone production numbers and, more recently, the unfolding problems in the Ukraine. One could be forgiven for only seeing a bleak global picture at the moment. While Figure 1 shows that global and regional markets are still down for the year, Figure 2 shows that there still remain pockets of resistance in our region. Followers of this article will see that Egypt, Morocco, Mauritius, Kenya and South Africa are higher (YTD) than they were at the end of February. Quite notably since the end of January (when only Egypt was up YTD) the markets have slowly started to recover suggesting a potential improvement going To page E3
Figure 1
Zimbabwe in Context (YTD) (A) EFM AFRICA
WORLD
EFM AFRICA ex ZA
EMERGING MARKETS
25% 20% 15% 10% 5% 0% -5% -10% -15% Annualised Volatility Source: G3 Analytics, MSCI and ZSE
YTD Performance
ZIMBABWE