Liquidity cycles dictate market performance – IH Securities

Zimbabwe’s economic landscape continues to evolve, with significant shifts in external sector performance, banking sector stability and monetary policy direction.
As the country navigates a constrained liquidity environment, key economic indicators suggest that authorities are prioritising exchange rate stability and financial resilience.
Accordingly, IH Securities, in its latest macroeconomic snapshot, provided insight into Zimbabwe’s investment climate.
“In the trailing four months, monetary authorities have managed to maintain a tight leash on liquidity, supporting ZiG stability. At face value, it appears that a contractionary monetary environment will persist with authorities aiming for a month-on-month inflation rate below 3 percent in 2025 and a terminal annual inflation rate of between 20 percent to 30 percent,” the securities firm said.
The firm also highlighted liquidity cycles as a key market driver.
“ZSE performance will likely not be largely decoupled from fundamentals and instead mirror liquidity cycles in the market. New regulations and currency requirements will likely provide headwinds for export-facing companies such as miners, with the sector needing to re-invest in local business operations,” they said.
“Financial stocks will likely be key beneficiaries of this monetary stance. In our view, the liquidity environment has presented valuations at current levels as presenting opportunistic buying opportunities. The market will be necessary to optimise resources.”
With dividend yields standing at 6 percent, IH Securities identified select stocks as attractive.
“We are currently in favour of blue-chip counters that are consistent dividend payers. Median dividend yield (+1) in the IH universe is at 6 percent and select stocks presenting higher dividend yields are Econet at 10,8 percent and Innscor at 6,9 percent. We recommend increasing exposure in at current levels,” they said.
As Zimbabwe heads into 2025, investors and businesses will closely monitor policy adjustments, exchange rate stability, and market liquidity trends to navigate the evolving economic environment.-ebsinessweekl

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