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Investec sees no Zimbabwe stocks to buy

As consumers, banks trip.

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

“They’re some of the cheapest stocks in our universe, but they might remain cheap for a long time,” Joseph Rohm, who helps oversee $2 billion of African equities for Investec, said by phone from Cape Town on January 9. “There’s a liquidity crisis in the Zimbabwean banking sector and the consumer’s under pressure.”

The Zimbabwe Stock Exchange Industrial Index tumbled 19% last year to trade at 7.4 times estimated earnings, the lowest among nine primary African indexes tracked by Bloomberg. The country abolished its currency in 2009 as inflation soared following farm seizures in 2000. While the economy is projected to grow 3.2 percent this year, according to the International Monetary Fund, the lender warned in November of low reserves, a large current-account deficit and weak banks.

Political tensions have risen as members of the ruling Zimbabwe African National Union-Patriotic Front fight over the succession to President Robert Mugabe. Justice Minister Emmerson Mnangagwa became first vice president in December, putting him in prime position to take over from 90-year-old Mugabe.

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

Above average

Investec, which has decreased its Zimbabwe investments in recent years, only holds Econet Wireless, a mobile-phone operator, and Delta Corp., which owns brewers and agricultural businesses. Econet was unchanged at 60 US cents on January 9, while Delta rose 1.9% to $1.06, the highest since December 24.

The estimated earnings ratio for Zimbabwe compares with 12 for the Nairobi Securities Exchange All Share Index in Kenya and 14 for South Africa’s main gauge. The MSCI Frontier Markets Index trades at 9.2 times.

While Zimbabwe’s stocks may be lower-valued than peers on the continent, it’s above the five-year average of 3.42. The main gauge rose 1.3% on January 8 and 9, the biggest two-day rally since November 26.

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

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

©2015 Bloomberg News

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