Weak banks keep Zimbabwe stocks cheap

LONDON — Zimbabwe’s stocks, the cheapest among African shares, are not a buying opportunity for Investec Asset Management, which says consumers and banks in the Southern African country are continuing to struggle.

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“They’re some of the cheapest stocks in our universe, but they might remain cheap for a long time,” said Investec’s Joseph Rohm last Friday. “There’s a liquidity crisis in the Zimbabwean banking sector and the consumer’s under pressure.”

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The Zimbabwe Stock Exchange industrial index tumbled 19% last year to trade at 7.4 times estimated earnings, the lowest among nine primary African indices tracked by Bloomberg.

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The country abolished its currency in 2009 as inflation soared following farm seizures in 2000.

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While the economy is projected to grow 3.2% this year, according to the International Monetary Fund, the lender warned in November of low reserves, a large current-account deficit and weak banks.

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Political tensions have risen as members of the ruling Zanu (PF) fight over the succession to President Robert Mugabe. Justice Minister Emmerson Mnangagwa became first vice-president last month, putting him in prime position to take over from 90-year-old Mugabe.

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“We had a big shift to hard liners within Zanu (PF),” Mr Rohm said. “That didn’t give us comfort.”

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Investec, which has decreased its Zimbabwe investments in recent years, only holds Econet Wireless, a cellphone operator, and Delta Corporation, which owns brewers and agricultural businesses.

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The estimated earnings ratio for Zimbabwe compares with 12 for the securities exchange all share index in Kenya, and 14 for SA’s main gauge. The MSCI frontier markets index trades at 9.2 times earnings.

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While Zimbabwe’s stocks may be lower-valued than peers on the continent, the value is higher than the five-year average of 3.42. The main gauge rose 1.3% last Thursday and Friday, the biggest two-day rally since November 26.

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Still, in the past six months, about two stocks fell for every one that gained. With the sell off affecting companies from banks to retailers and manufacturers, money managers such as Investec’s Mr Rohm are staying out of the Harare bourse.

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“I don’t see a catalyst for change in the near term.” Mr Rohm said. “The economy’s very weak.”

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Nigerian stocks fell the most in the world last week as investors spurned Africa’s largest crude producer, with political tensions rising five weeks before a key vote and as oil prices continued to slide.

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The Nigerian Stock Exchange all share index fell 0.9% by the close on Friday to extend its five-day decline to 13%, the most among 93 global indices tracked by Bloomberg.

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The 55% decline since the end of June in crude, Nigeria’s biggest export, uncertainty over the outcome of the February 14 election and rising attacks by Islamist militants are pushing investors out of Africa’s biggest economy.

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President Goodluck Jonathan and the ruling People’s Democratic Party are facing a challenge from a merger of Nigeria’s biggest opposition parties, while Boko Haram has attacked the northeast town of Baga twice in the past week.

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“The risks around Nigeria have increased,” Mr Rohm said.

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Dangote Cement, which makes up about a quarter of Nigeria’s all-share gauge’s value, fell 5% to 158.65 naira, more than any other stock. Nestle Nigeria dropped 4.8% to 855 naira.

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Bloomberg