Brokerage firm, IH Securities said the monetary policy remained on course but there was downward pressure from the impending elections pressure.
IH Securities noted that the central bank has re-iterated its stance of maintaining a hawkish approach to maintain monetary stability whilst striving to keep the currency basket at a mix of 60% USD and 40% local currency.
This comes after the central bank doubled down on its contractionary measures to offset pressures with the main policy rate being raised to 200%. Such a tight monetary policy stance allowed the bank to anchor inflation and exchange rate expectations as the economy responded ending the year in a disinflation trajectory.
“The revised interest rates still remain a deterrent towards speculative borrowing at these levels. However, on the fiscal aspects, budgetary stringency by the government is likely going to be challenging to exercise in an election,” the brokerage firm said.
They believe that against this backdrop, there remains downside to inflation forecasts.
“After slowing down 75% in real terms in 2022, the ZSE seems to be entering positive territory again on abundant buying opportunities,” IH Securities noted.
However, they noted that while fundamentals speak to a bullish stock market in 2023, in 2022 we observed a dislocation between fundamentals and the ZSE stock market performance and the uncertainty around money supply developments in 2023 propels us to lean more towards defensive stocks that have strong dividend policies in case capital gains remain subdued.
Forward looking, the bank expects the downward trend in inflation to continue into 2023 with target for month-on-month blended inflation being set to below 1,5% whilst annual inflation is expected to progressively decline to close the year in the range of 10-30%.
IH Securities noted that key risks to estimates are possible spill-over effects from global events and perceived confidence levels as the country heads towards general elections – Harare