THE bearish sentiment prevailing on the Zimbabwe Stock Exchange (ZSE) presents buying opportunities in select counters that now appear undervalued, FBC Securities has said.

In the past month, weaknesses have persisted on the ZSE with an aggregate ZW$300 billion (US$517,241 million) having been wiped off the market amid a retreat in the market’s heavyweights.

This saw benchmark indices closing the month pointing southwards as the  ZSE Top 10 Index shed 20% to 8 209 points from 10 265 points as uncertainties wore down investors.

The Mid Cap Index at 29 026 points, was 12% below July closing level.

In its September stock pick recommendations, FBC Securities said the prevailing stability also bodes well for local businesses, as a deceleration in inflation and currency devaluation reduces business expenses, allows for future planning and investment as well as improves consumers’ disposable income.

“We believe the bearish sentiment prevailing on the market presents buying opportunities in select counters that now appear undervalued, resulting in notable upside potential,” FBC Securities said.

“The prevailing stability also bodes well for local businesses, as a deceleration in inflation and currency devaluation reduces business expenses, allows for future planning and investment as well as improves consumers’ disposable income.”

The depressed performance, however, has not been peculiar to ZSE as regional and global equities last week fell to a six-week low on slide in Asian shares following a lockdown in China’s Chengdu.

FBC recommended that investors develop well-diversified portfolios mitigating those from sector and asset class specific risks.

The securities firm added that it would be sensible for them to consider 40% of the portfolio for active trading.

“We recommend investors 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,” it said.

“It will be prudent to consider about 40% of the portfolio for active trading, this will allow the investor to realise some profits in the event of short-term swings in sentiments in the market, in particular on non-core holdings.”

The firm also said government measures to tame inflation and local currency devaluation remain encouraging, evidenced by the deceleration of monthly inflation from 30,7% in June to 12,4% as at end of August.

Parallel market rates have also stabilised in recent weeks, hovering at ZW$700-ZW$750, while on the official auction, the rate has moved to ZW$580 this week.

FBC said the local economy’s stability remains fragile, however, hinged on the government's ability to continue to control money supply as well as insulate the economy against global supply and inflation shocks.

“The global economic outlook remains largely uncertain, hampered by rising inflation and the on-going consequences of geopolitical tensions,” it said.

“Most economies have hiked interest rates to tame inflation, with the US hiking rates by a cumulative 225 basis points since March. We anticipate some reduction in inflation owing to improving global supply chains and the drops in prices of fuel and other commodities.”