Dear Investor,
Amidst a backdrop of evolving global economic conditions, the Zambian Capital Markets have demonstrated resilience and adaptability in the year 2023. As you navigate through the joy’s of being an investor, in a dynamic investor landscape, this report provides a comprehensive overview of the performance and key trends shaping the local investment environment particularly for the month of October. Against a backdrop of Inflation and down trend of the Kwacha, the Zambian market has exhibited notable developments in various sectors. This update aims to equip stakeholders with valuable insights to make informed decisions in an ever-changing investment climate
STOCK MARKET UPDATE – The LuSE
From September 29th to October 30th, 2023, we observed various changes in the share prices of several companies. The following companies experienced an increase in their share prices: CEC Africa Investment (CCAF) saw an increase from K0.40 to K0.44, Copperbelt Energy Corporation (CEC) increased from K6.60 to K7.60, Metal Fabricators of Zambia (ZMFA) went from K4.83 to K4.90, Standard Chartered Bank Zambia (SCBL) rose from K1.40 to K1.50, Zambeef Products (ZMBF) increased from K2.23 to K2.54, Zambia Bata Shoe Company (BATA) moved from K2.60 to K2.70, Zanaco (ZNCO) went from K3.70 to K3.80, and Zambia Sugar (ZSUG) surged from K17.99 to K20.00. On the other hand, Madison Financial Services (MAFS) dropped from K2.47 to K1.86.
| COMPANY | PRICE (SEP) | PRICE (OCT) | CHANGE |
|---|---|---|---|
| CCAF | 0.4 | 0.44 | +10% |
| CEC | 6.6 | 7.6 | +15% |
| ZMFA | 4.83 | 4.9 | +1% |
| SCBL | 1.4 | 1.5 | +7% |
| ZMBF | 2.23 | 2.54 | +14% |
| BATA | 2.6 | 2.7 | +4% |
| ZNCO | 3.7 | 3.8 | +3% |
| ZSUG | 17.99 | 20 | +11% |
| MAFS | 2.47 | 1.86 | -25% |
Investor Scenario
Let’s consider what this means for individuals holding 100,000 company shares. The value of your holdings increased by K4,000 for CCAF, K100,000 for CEC-a significant increase, K7,000 for ZAMEFA (ZMFA), K10,000 for Standard Chattered Bank (SCBL), K31,000 for ZamBeef (ZMBF), K10,000 for BATA, K10,000 for Zanaco, and K201,000 an impressive gain for Zambia Sugar. Conversely, the value of 100,000 shares holdings decreased by -K61,000 for Madison Insurance. The most significant changes are observed in CEC and Zambia Sugar. CEC has been consistently showing positive price movements.
In summary, during this period, a significant number of stocks displayed positive net price movements, resulting in gains for shareholders. However, Madison Financial Services stock saw a decrease. It’s worth noting that the rest of the listed companies had no change in their share prices.
In recent stock market updates, Puma Energy Zambia Plc reported a decreased profit of ZMW14.24 Million in their HY2023 Interim Report. This decline was attributed to stock holding losses and currency volatility. In contrast, Zambia Bata Shoe Company Plc reported impressive results, with a 30% growth in turnover and a 51% increase in profit before tax in H1 2023. Furthermore, ZCCM-IH Investments Holdings Plc Zambia declared a final dividend of K2.41 per share on October 10th. Chilanga Cement PLC similarly declared an interim dividend of K1 per share on October 12th. Lastly, on October 31st, Zanaco Plc published its Quarterly Financial Statements for the quarter ending on September 30, 2023, providing insights into its financial performance for that period.
GRZ BONDS
GRZ Bond prices and yield rates have an established inverse relationship, a well-known and proven rule of thumb. This relationship is evident when we compare the Bond prices and yield rates in the Bank of Zambia Bond auction results for September 29th and October 27th, 2023.
| 29th SEPTEMBER 2023 | 27th OCTOBER 2023 | ||||
|---|---|---|---|---|---|
| BOND TENURE | PRICE | CUT-OFF YIELD RATE | PRICE | CUT-OFF YIELD RATE | |
| 2-Year | K85.7872 | 17.75% | K86.9204 | 17% | |
| 3-Year | K77.2933 | 21.5% | K79.4078 | 21% | |
| 5-Year | K65.9875 | 23.5% | K70.4214 | 22% | |
| 7-Year | K59.0985 | 24.5% | K60.2741 | 24% | |
| 10-Year | K55.8892 | 26% | K58.1067 | 25.5% | |
| 15-Year | K52.9301 | 26.5% | K54.0143 | 27% | |
Overall, bond prices in October increased, and their respective cutoff yield rates decreased compared to September.
MACROECONOMIC INDICATORS
Overall inflation for October 2023 has risen to 12.6% compared to 12.0% recorded in September. This is a notable increase from the 9.8% overall inflation recorded for the second quarter of 2023 by the Bank of Zambia. Essentially, this means that, on average, the prices of goods and services have increased by 12.6% between October 2023 and October 2022. It’s important to note that the monetary policy rate has remained unchanged at 10% since August 22, 2023, and it’s likely to be revised after the upcoming Monetary Policy Committee Meeting scheduled for November 20 to 21, 2023.
CURRENCY HIGHLIGHTS
The Zambian Kwacha is currently trading against the United States Dollar(USD) at K22.0258, the Great British Pound(GBP) at K26.7460, the Euro(EUR) at K23.3650, and the South African Rand(ZAR) at K1.1744. This is compared to the exchange rates recorded on the 29th of September 2023, where the Zambian Kwacha traded against the United States Dollar(USD) at K20.947, the Great British Pound(GBP) at K25.5624, the Euro(EUR) at K22.1627, and the South African Rand(ZAR) at K1.1069.
NATIONAL BUDGET HIGHLIGHTS
The 2024 budget speech presented to Parliament by Honorable Dr. Situmbeko Musokotwane, Minister of Finance and National Planning, on September 29, 2023, outlined several note worthy developments. The following is an analysis of selected key developments of the 2024 budget.
Zambia’s economy is projected to slow down by 2% from 4.7% to 2.7% in 2023, due to mining and energy sectors down trend development, as well as escalating costs and prolonged debt negotiations, all contributing to a sluggish economic performance.
To address the high cost of living and enhance disposable income for individual taxpayers, the monthly PAYE exemption threshold has been increased to K5100, and the minimum and maximum limits of the tax bands have been raised by K300. Additionally, the highest PAYE tax band rate has been reduced to 37% for earnings above K9,200. The impact of the PAYE tax reduction becomes evident when we examine its effect on individuals earning different income levels. Let’s consider two scenarios: Under the new PAYE rates, an individual earning K25,000 would have a net tax income of K18,013, whereas, under the previous PAYE rates, the net tax income stood at K16,460.70. Similarly, for someone earning K250,000 monthly, the net tax income increases to K159,763 with the new PAYE rates, compared to K154,835.70 with the previous rates.
In terms of indirect taxes, a mobile money transfer levy as a means to expand the tax base will be introduced. Several significant tax adjustments will come into effect, including the removal of customs duty on motorcycles and tricycles in complete knock-down form, equipment for geothermal activities, electric-powered vehicles, and a 10% customs duty reduction on rolling stock imports. The period for claiming Input VAT refunds for pre-generation costs has been extended to 7 years. Mineral Royalty Tax agents will be designated to enhance compliance, and a prescribed invoicing system will be implemented for all tourism levy transactions.
The mining sector has faced challenges such as lower grades and flooding, resulting in decreased GDP and tax contributions, along with a depreciating kwacha. To stimulate the mining sector, various actions have been taken or proposed to resolve these issues, encouraging investments that can lead to the establishment of new mines.
As your dedicated Financial and Investment Advisors, we want to emphasize the importance of checking with us- when need arises, on the potential impact of the 2024 National Budget on your investments. Your confidence in our expertise means everything to us, and we are committed to enriching your experience and supporting your financial aspirations.
We firmly believe that well-informed clients are in the best position to make sound decisions. Our primary goal is to equip you with the knowledge and resources necessary to excel in today’s ever-changing financial landscape.
We genuinely appreciate your choice in making us your trusted Financial Partner and Wealth Managers. We eagerly anticipate the opportunity to continue providing you with outstanding service and timely market insights, empowering you every step of the way on your financial journey.
Lyapa Mpempulwa-Mbewe
Chief Executive Officer
