First Mutual Wealth (FMW) says the low base from which the Zimbabwe Stock Exchange (ZSE) is coming will allow for some headroom recovery in first quarter (Q1) 2024 as investors will be attracted by relatively high dividend yields and excess money supply propping up the ZSE’s recovery.
FMW, in its latest economic and market review, said the extent of the recovery will more likely be influenced by the extent of liquidity conditions.
“Limited ZSE to Victoria Falls Stock Exchange (VFEX) migrations are expected; however, new listings on the VFEX are likely to arise in the form of new investment products and entities seeking capital.
“We expect a more stable recovery on the VFEX when compared to the ZSE, as companies on the VFEX are similarly trading at discounts to their intrinsic values on the VFEX, but with the USD as the trading currency, less volatility is expected,” reads the report.
The firm said that with USD contributions increasing as well as more investors looking for USD investment vehicles, the VFEX is expected to garner more liquidity and gradually recover.
FMW said the alternative investment asset class has been able to avoid value distortions arising from short-term policy changes and offer sustained real asset value preservation and growth.
The firm said the asset class, however, remains illiquid and long-term in nature. “Caution therefore is necessary when investing in this asset class, as illiquid conditions in the long term make it unsuitable for risk-averse and short-term investors.
“We expect the depth of assets in the alternative investment asset class to continue, which should attract long-term capital and improve the liquidity and benefits of this asset class in the outlook,” FM said in its investment outlook.
FMW said in the property market, it expects an increased prominence of hard currency rentals and shorter lease agreement arrangements to persist for local currency-denominated rentals as inflation uncertainty remains.
It said property developments are likely to be skewed in favor of storage, warehouse, retail, port or transport hubs, tourism, and residential developments, while CBD (Central Business District) office space is likely to have lower relative activity in the immediate term.
“We similarly expect innovations in the form of real estate investment trusts listing on local public bourses to enhance the pricing and liquidity of property developments,” FMW noted.
FMW said Zimbabwe is still expected to register GDP growth of 3 percent in 2024 on the back of improved performances in the tourism, utilities, construction, mining, and ICT sectors.
It added that investments in steel processing and lithium exports, as well as firmer prices for precious metals, will work as strong tailwinds supporting this growth.