FBC Securities, a broking firm in its first quarter report said the economy is in a fragile state as the country awaits the much anticipated harmonized elections.
In its report, the securities firm said relative stability in the local economy is fragile as the country nears elections, and navigates an uncertain global outlook.
“Despite positive developments in inflation and exchange rate volatility following government measures implemented last year, the local currency has faced increasing pressure on the parallel market,” said FBC Securities.
Additionally, the continued devaluation of the local currency on the black market, which is outpacing the official exchange rate, resulting in widening of the black market premium may lead to increased arbitrage.
The securities firm believes that the prevailing uncertainty drives the case for investment in defensive stocks with a proven track record of performance, even in times of downturn.
As has been pointed out by every brokerage firm, investors will derive value from holding positions in counters with diverse business models, inflation hedging capabilities foreign currency generation capacity and stable dividend policies.
“A general bullish sentiment is likely to prevail on the ZSE, however gains may be moderated by inflation tightening measures and liquidity constraints,” FBC Securities added.
For a more secure investment option, the VFEX remains a viable option as it has USD liquidity and better hedge against the volatile local currency. According to brokers, the exchange currently hosts a number of quality listings, and has a healthy pipeline of expected listings in the near future.
FBC Securities says, despite the current liquidity challenges, they anticipate improved activity owing to increased flow of USD in the formal economy and the growing number of listings on the bourse in the medium to long term.
This comes as domestic GDP growth is projected to slow from 4 percent in 2022 to 3,8 percent in 2023, sustained primarily by mining, agriculture and enhanced activity in the manufacturing, wholesale and retail trade sectors.
In the quarter under review, monthly inflation decelerated from 0,7 percent in January to -1,6 percent in February and 0,1 percent in March. Annual inflation has eased from 101,5 percent in January this year to 87,6 percent at the end of the quarter – Harare