The Lusaka Stock Exchange (LuSE) has had a very sluggish first half of the year. The index declined by 5.2% to close at 5,842.08 as at June 30 2015:
Market capitalisation fell by K1.7 billion ($237 m). At least 3 Initial Public Offerings (IPO) were supposed to have occurred with Finance Bank Plc leading the charge but only Ikulileni Investments Plc filed for one which failed to meet its goals (after receiving some bad press). The Industrial Development Corporation (IDC) was looking to offload the Governments 30% stake in Afrox Zambia to the public but nothing has happened to date. The potential acquisition of Finance Bank Plc by Atlas Mara could also shelf any IPO plans.
Top 3 performers
Zambia Bata Shoe Company (LUSE: BATA) was one of the great stories of 2014. It reported a 37% year-on-year increase in net profit to K13 million as customer volumes increased after completion of store remodeling. This momentum has continued into 2015. The company could see further growth as it continues to offer value-for-money products to consumers facing inflationary pressures.
Bottom 3 performers
Zambia Sugar (LUSE: ZSUG) leads this pack. It recorded a 24% increase in net profits to K146 million in financial year 2014 which was mainly driven by a reduction in the effective income tax rate from 22% to 12%. Zambia Sugar is facing a surplus in sugar stocks on the global market, weak European Union (EU) sales and increased domestic power outages.
Investors can currently get a better and safer deal by parking their money in Government treasury bills and bonds which are offering very attractive yields as a consequence of fiscal challenges being faced. The Kwacha’s vulnerability is not only negatively affect the earnings of the majority of stocks traded on the LuSE but also foreign investor returns.
Despite the potential upside of the exchange, should the above conditions continue to persist, the LuSE is looking at finishing the year in the red.
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *