eBusiness Weekly
Business Writer
Two local stockbroking firms had mixed reaction to the 2021 Monetary Policy Statement released last week Friday by central bank governor Dr John Mangudya.
While IH Securities was more appreciative of the measures the RBZ has put in place and the direction the economy is heading, Imara Securities was dismissive saying the authorities are “out of sync with reality”.
On the foreign exchange auction system, IH Securities said despite some negativity around the system, “its introduction provided a much needed devaluation”.
Imara said the foreign exchange auction system viability in the long term remains “precarious in its current form”.
Both firms, however ,seemed to agree on the move to allow businesses to price in hard currency with Imara attributing the stability in the exchange to the return of multi-currency which reduced burden on the forex exchange auction.
On its part IH Securities said allowing businesses to price in hard currency further enhanced confidence.
The two stockbroking firms were in agreement that the Government had set itself an unrealistic inflation target.
The Reserve Bank of Zimbabwe has projected annual inflation to close the year at 10 percent.
While both IH Securities and Imara Securities share the same sentiment that inflation will remain on a downward trajectory they both expect the country to overshoot the set inflation targets partly due to unpredictable external pressures on domestic pricing.
IH said domestic inflationary pressures will remain under the surface amid shaky market confidence about the current equilibrium and possible lobbying by trade unions for further upward review of civil servant salaries.
Imara was more specific saying even taking the most optimist month-on-month inflation rate of 3,0 percent, official inflation will
close December 2021 at 47,9 percent per annum.
The reality on the ground is that hyper-inflation in Zimbabwe dollar terms still persists although USD inflation remains low, the oldest stockbroking firm in the country Imara said.
Experts, however, say though inflation levels in Zimbabwe are high they cannot be classified as hyperinflation in its true definition. Hyperinflation is when the prices of goods and services rise more than 50 percent per month.
Zimbabwe’s month-on-month inflation has not reached those levels and were just above 5 percent at the last count in January.
Other policy measures in the 2021 Monetary Policy Statement, include the increase of interest rates.
The central bank increased the Bank policy rate for overnight accommodation from 35 percent to 40 percent while the medium term lending rate for the productive sector was also increased to 30 percent from 30 percent per annum.
IH believes the lending rates, amidst a deceleration in month-on-month inflation, might “see commercial banks themselves become more bullish” about returning to core business leading to a reversal in currently low loan to deposit ratios. Counterpart Imara, however, does not share the same view saying the year 2021 is likely to be another difficult year on account of among other things “negative real interest rates.”
“In our opinion, for as long as interest rates remain pegged at negative real levels, local investors will be hard pressed for viable alternative asset classes,” said Imara.
The two firms, however, continue to see scope in stock market investments.
“We remain bullish on consumer names in the equities space as we see an uplift in consumer liquidity and demand in this year despite Covid-19 impacts,” IH said.
Imara said urged investors to look for balance sheet strength, strong management, cash generation, solid brands, forex hedge, dominant market share and companies which can adapt in a drastically changed environment.
“In our view, blue chip stocks will offer defensive qualities that can limit the downward risk of equity portfolios.
“Our picks tend to be monopolistic, lowly geared, well managed businesses with strong cash generation abilities and solid balance sheets.”
