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(HERALD) Boon for Zim exporters as exchange rate is floated

Boon for Zim exporters as exchange rate is floated
New Ziana.

Harare. — Zimbabwe Stock Exchange listed export-oriented companies stand to benefit most from the recently floated exchange rate not only through improved income but also a surge in share prices, analysts said on Tuesday. Two weeks ago, the Reserve Bank of Zimbabwe allowed the local currency to float freely, which immediately saw a huge jump in the exchange rates for most hard currencies.

For example, the local dollar was previously fixed at $30 000 to the US greenback, but this has since shot up to above $200 million to one US dollar.

Analysts said exporting companies, which had for a long time cried foul over the unviability of the fixed exchange rate, were expected to announce improved earnings as early as the next reporting season.

These include heavy exporters such as the Cotton Company of Zimbabwe and most mining companies.

Tourism counters such as African Sun and Rainbow Tourism Group were also likely to benefit from the floated exchange rate, as they earn significant income from foreign-currency paying travellers, and were managing a number of hotels outside the country.

Analysts said the increased earnings potential of the companies had already begun to whet the appetite of the investing public, expected to lead to a rally in their share prices.

An analyst with Interfin Securities told New Ziana that the floated exchange rate "was definitely going to have an impact on the share prices of listed export companies".

"Already we have seen an upward movement in the share prices of some agro counters and mining firms such as the Cotton Company of Zimbabwe and Interfresh because of the export factor," he said.

Zimbabwe Allied Banking Group research analyst Mudzingwa Nhewatiwa also concurred, adding that use of the inter-bank exchange rate meant that export companies would now get value for their money.

"This is going to boost their earnings as well as their performance. There is now an incentive for them to actually increase their production as some had reportedly scaled down," he said.

He said the fixed exchange rate grossly impacted on the companies’ earnings as there was a widening mismatch between income and operating costs.

The inter-bank rate, he said, was responsive to inflation. — New Ziana.

Labels: EXPORTS, ZIMBABWE, ZIMBABWE DOLLAR, ZSE

posted by MrK @ 3:33 PM