The ZSE has given us a lot to talk about this year. The rapid rise in the 1st quarter and the decline early in the 2nd quarter brought surprise winners as small-cap stocks dominated the green sections. A mellowing out in the 3rd quarter as things seemed to be shifting back to the normal order has been crowned by a 4th quarter surge in October. The ZSE gained an impressive 40.76%, its biggest gain in 2021 so far, surpassing January’s 37.18%. It wasn’t all roses as there were some pretty big thorns with many losers during October. The ZSE also welcomed back suspended CFI Holdings to the fray. Let’s take a look at the details.
There was a lot to celebrate on the ZSE in October. Suspended CFI holdings made a powerful return to the bourse posting growth of 8260.42% as it repriced after a long layoff. Other notable gainers in October were Natfoods which more than doubled shareholder value growing 135% and ZECO registering only its 3rd trade of 2021 posting 100% growth. 31 of the 51 active counters registered growth in October, including the Old Mutual ZSE Top 10 ETF which brought happy investors an additional 47.90% in their pockets. The ETF particularly benefitting from all members of the top ten being in the green including Cassava which was suspended from trading for the first week. Miekles which finally announced its plans for the Tanganda unbundling made a late surge to grow 76.80%.
There were many losers, 18 to be exact, in October. Chief amongst them was struggling Medtech which finally announced its plans to transform both its business operations and its shareholding structure. The market did not respond favourably pricing the soon to be Bridge Fort capital shares 42.74% lower than the previous month. Once-favoured small-cap counters Star Africa (-11.94%), Willdale (-18.01%), NTS (-12.50%) could not bring joy to shareholders in October. There were 2 non-movers during the month CAFCA and Proplastics. A quick look at the other exchanges shows no movement for Finsec based Old Mutual Zimbabwe Limited, similar for Victoria Falls Stock Exchange based SeedCo International while Padenga shareholders found the going tough losing 24.71%
A look at our capitalisation indices will show a turn in the tide that has prevailed early in the year. The top ten index gained 45% in the month, while the medium caps far underperformed growing only 8%. The small-cap index didn’t slack as a whole growing 39% in October. The year to date picture remains hilariously in favour of the small caps though the top 10 has started to show some much-needed signs of life. Surprisingly CFI’s relisting did not add that much to the ZSE, the gain excluding CFI was 40.12% (versus 40.76% inclusive).
There are a few takeaways from what we’ve seen in October
Form is temporary, class is permanent
Early in the year, the big gains were in small-cap counters, that can’t be disputed. However, that should not have been taken as a message to disregard the Blue chip companies that inhabit the top 10. In the long run, you will be reminded why they are the biggest companies in Zimbabwe.
Cream rises to the top
To keep this short, the top 10 ETF will select the top 10 companies every quarter and invest in them. This makes the ETF a great idea to invest in as it always contains the top companies. If a top company lags as OK Zimbabwe did, it is replaced by a Miekles or Simbisa. As long as there is hope in the top 10 (and there always is) there is hope in the ETF.
Zimbabwe loves unbundling
When Econet unbundled Cassava it was the talk of the town. Now that Miekles has announced its plan for unbundling Tanganda the company surged to almost double its opening price for the month but achieved the bulk of this in one week. Miekles shareholders will receive 1 Tanganda share for every Miekles share they hold.
Storm on the horizon
RBZ’s monetary policy committee met on Thursday the 28th of October and came out with many resolutions to curb the depreciation of the Zimbabwean dollar. The measures all pointed to contractionary monetary policy and increasing the reward for saving. The ZSE will likely be affected by this and we should expect a slowing in the growth of the exchange as a whole.