By ETimes
FBC Securities said the country might be entering a recession which will affect the revised growth target set by the Treasury in its mid-year budget review.
The global economic outlook remains uncertain, hampered by rising inflation and the ongoing consequences of geopolitical tensions. Most economies have hiked interest rates to tame inflation.
FBC securities said, “Locally, we believe positive domestic economic growth remains a possibility given the positive developments in the mining and tourism sectors. Growth may however be below the 4.6% projection owing to restrictive factors such as the currency crisis, soaring inflation, liquidity constraints, policy missteps and perennial power shortages
The rapid interest rate hikes are expected to have consequences on the rate of economic growth in the current year as well as next year with a global recession seeming more likely.
“We also note the upward revision of interest rates, increasing the cost of borrowing, as a limiting factor to desired growth projections as it weighs down aggregate demand,” they said
The securities company said it expects prolonged liquidity challenges to drive a bearish sentiment on the market but it maintained the view that the bearish market presents buying opportunities in select counters that now appear undervalued, resulting in notable upside potential.
Despite the challenges presented by liquidity constraints and global pressures, FBC Securities believes the market continues to present investment opportunities in counters with resilient business models, capable of weathering the headwinds.
Ahead of the festive season, deceleration of inflation coupled with an improvement in foreign currency availability are likely to boost business’ performance.
As for the Zimbabwe Stock Exchange (ZSE), the securities firm said the market’s performance has largely been subdued following policy intervention and as a result of liquidity constraints, the underlying fundamentals previously driving investment on the stock exchange remain in place.
The belief is that at current levels, the stock market presents buying opportunities in selected counters.
“We recommend that the investor develop a well-diversified portfolio, mitigating the portfolio from sector and asset class specific risks. The portfolio should be future oriented, long term and selected instruments should be poised for a positive return through both capital gains and dividends, thus meeting the investor’s objective,” FBC Securities said – Harare