DESPITE a challenging environment, we have seen adaptive consumer facing companies continuing to exhibit volume growth year-on-year, which in our view, underscores a resilient informal sector.
An observation is that companies that have invested into capacity such as Padenga and Innscor have managed to defend real balance sheet value in the current environment.
Our strategy for 2025 is rooted in a search for safe havens in the face of global geopolitics as well as shifts in commodity prices and currencies.
As 2025 will likely be another year of navigating through regulatory and monetary uncertainty, the lack of quality investment opportunities will persist.
In our experience, the Zimbabwe Stock Exchange (ZSE) performance will continue to be driven by liquidity cycles. While real value traded on the ZSE has been on a decline owing to a myriad issues, we believe that there still remain quality stocks ripe for investment on both bourses, particularly when the market gets oversold.
However, as a defensive move emanating from money supply developments remaining uncertain, we are in favour of blue chip counters that are consistent dividend payers. Median dividend yield (+1) in the Inter Horizon (IH) Securities universe is at 6%, and select stocks presenting higher dividend yields are Econet at 10,6% and Innscor at 6,9%, which we recommend increasing exposure in at current levels.
As a form of diversification post-profit taking, we are also recommending high-yielding money market instruments.
Despite the challenging operating environment in 2024, the ZSE showed moderate recovery from its weak performance in the prior year in which the market retreated 32%.
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Market capitalisation in real terms was 19% ahead of 2023, closing the year at US$1,76 billion. The bourse lost two listings in the year with Edgars migrating to the Victoria Falls Stock Exchange (VFEX) while Bridgefort Zimbabwe delisted.
The year also saw suspension of Truworths, which was placed under corporate rescue, and Meikles, which is battling corporate governance issues. Trading activity has remained constrained on the bourse for an extended period.
By the end of December 2024, prices were trending below yearly averages, impacted by the liquidity crunch in the market. Value traded in real terms has been on a consistent decline since 2022.
In 2024, the second quarter was hit hardest by the introduction of the ZiG, following which both volumes and value traded were subdued as the market was still searching for direction.
While activity recovered during the third quarter fuelled by exchange rate movements, monetary measures implemented to arrest exchange rate movements impacted liquidity in the fourth quarter.
Value traded on the ZSE, however, fell 30% on an annual basis from US$128 million to US$89 million. On the VFEX, market capitalisation was 6,1% ahead of 2023, benefitting from new listings.
Aside from Edgars which migrated from the ZSE, Invictus Energy also listed its depository receipts. Value traded on the VFEX was 117,84% ahead of the prior year at US$56,70 million with Innscor and Simbisa contributing 39% and 37%, respectively.
Regionally, stock markets showed resilience and growth, outpacing other emerging markets in local currency returns.
Although some of these gains were undermined by currency dynamics, some exchanges still offered strong returns in US$ terms, with Kenya leading the pack on the back of a strengthening shilling.
On the flipside, gains on the Nigerian Stock Exchange were overshadowed by devaluation of the naira.
- This article was extracted from the Inter Horizon (IH) Securities’ 2025 equity strategy. IH Securities is a licensed member of the Zimbabwe Stock Exchange and Victoria Falls Stock Exchange, facilitating securities trading on these exchanges.
