Grim news haunts flat ZSE

							Grim news haunts flat ZSE
Monday, 21 February 2005 02:00




marketmovers with Rangarirai Mberi

GRIM news on inflation and a heavy sell-off on bellwether stock
Old Mutual combined to knock the ZSE lower last week, but
Wednesday's record volume of $22, 1 billion helped keep
sentiment up.

But there was no consensus on the market as to whether this
was a mere bout of profit taking, or the start of a potentially
painful period of correction, which some analysts say is well
overdue.

The key industrial index fell 3,97% Monday, after the Central
Statistical Office gave a weaker than expected report showing
the first rise in year-on-year inflation in twelve months. Inflation
ran a marginal 0,9% higher to 133,6%, the CSO said, lifted
mostly by a sharp increase in the cost of food. The new data
raised fears that central bank could roll back its soft policy on
rates, which is based primarily on a rosy inflation outlook.

However, a top official with the RBZ's money markets division
said there was little chance of a shift on policy in the medium
term, at least not before June. Central bank plans to have cut
rates to 70% by then, after which it is expected to announce a
new stance on rates that would be determined by the trend in
inflation at that time.

Monday's losses spilt into Tuesday, down 1,66%. There was no
respite Wednesday, as Old Mutual once again dragged the
index to a 7,01% loss.



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Grim news haunts flat ZSE
Monday, 21 February 2005 02:00




"It's all Old Mutual. Last week, it took the market higher. This
week, though, the market is falling with it," a dealer said after
first call Thursday, as "Big Green" looked to be heading for yet
another loss. Another trader pointed to jitters over the news
from the CSO as responsible for a large part of the carnage.

But amid the worry, optimists say it might be too early to sell in
panic. According to economist Dave Mupamhadzi, January's
inflation numbers should not be an immediate cause for worry -
the worrying should begin only when a clear trend upwards
begins to appear.

"It's a bit too early to say that the RBZ will miss its inflation
targets. Let's wait to see whether or not this turns into a trend,"
Mupamhadzi said.

Apart from the inflation news, it was a series of losses taken by
Old Mutual that had the market talking. Old Mutual fell hard on
Wednesday, down a huge $8500 to $27 000 on strong selling
pressure. The midweek losses had been preceded by a $4000
loss at the start of the week and a $7000 loss Tuesday.

Old Mutual has accounted for much of the strength that has
carried the main average to record highs over the past two
months. The stock's attractiveness is in its fungibility - it is
tradable between five different markets - which gives investors
juicy arbitrage opportunities. Zimbabweans living abroad have
also been buying the stock recently.

StandardBusiness reported last week how controversial British


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Grim news haunts flat ZSE
Monday, 21 February 2005 02:00




businessman Nicholas van Hoogstraten has been stalking Old
Mutual for all its worth in recent weeks, buying in huge volumes
and selling in London. The share has driven demand on the
market.

For instance, Old Mutual accounted for 59% of the total of $17
billion traded on the ZSE on the Thursday before the fall.
Despite last week's weakness, analysts predict early recovery,
as Old Mutual still remains a profitable and defensive share.

Elsewhere, NMB drifted lower after the bank warned it would
post weak earnings, while speculation that it was a takeover
target escalated.




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