For those of us that believe in the existence of the random walk hypothesis and consequently the efficient markets hypothesis, we understand that information is very important especially in the era of well developed speculative investors who rarely base investment decisions on fundamentals but on the arrival of new information.
The random walk hypothesis is a financial theory stating that stock market prices (and prices of all financial assets) evolve according to a random walk (so price changes are random) and thus cannot be predicted. It is consistent with the efficient-market hypothesis.
The Efficient Market Hypothesis (EMH) is an application of ‘Rational Expectations Theory’ where people who enter the market, use all available & relevant information to make decisions.
This Efficient Market Hypothesis implies that stock prices reflect all available and relevant information. The Efficient Market Hypothehis there states that stock prices will change with the arrival of information. If information is good, prices will move in a favorable direction and if it’s bad, the opposite will occur.
Now based on the above, those that monitor information will understand which publications will produce a balanced information and which publications will dwell on only on negatives.
Now it is very easy to confirm that the African confidential has been a source of only negative information for the country. When you look at the IMF report, it is a bearer of both good news and bad news for Zambia, therefore the effect it will have on rational investors will be mature since negatives and positives have been mentioned.
When you look at the recent article in African Confidential, only those that do not pay attention to detail will think this is a piece of journalism. To the contrary, the article is a well calculated move to champion the interests of a certain interest group pushing for a certain agenda (please this agenda might not even be political so spare me of politics). When you read that article, to makes reference to certain meetings that were private in nature but whose contents are in that African confidential report. The article also mentions of a recommendation to GRZ in possible solutions to liquidity problems. Now that solution reflects the interests of certain companies trying to purchase certain government assets. It’s very easy to attach names but at this point we leave it at this.
Coming to Bloomberg, this is a respected publication and collects information from all over. In Bloomberg, you are lucky when Zambia is mentioned 5 times in any article in a year. But the recent trend has seen Zambia constantly there and dwelling only on the negatives.
There is a recent article that uses data on Zambian bonds to mention that a crisis is in the looming. They rightly point out that our bonds have an inverted yield curve. When such occurs, it means that investors anticipate a down turn in economic development of a country. What this particular article omits though is that in the same period, the USA also experienced an inverted yield curve. A lot of other countries experienced an inverted yield curve. Last year, the USA also had one.
So why all the fuss about Zambia?? It’s true that debt levels have gone up but should we continue singing bad news and in most cases fake news including the fact that NAPSA money was used to pay salaries??? If NAPSA was a listed company, it’s shares would have been in trouble. Imagine pensioners’ reaction thinking their monthly payments might not kick in because of careless investment decisions by NAPSA? We need to be mature and protect our country.
We should not hide our problems but we should also not over escalate them because we are sending a bad signal to investors.
For those who want proof on the USA inverted yield curve check this article:
https://www.cnbc.com/amp/2019/
The US bond yield curve has inverted. Here’s what it means
Spriha Srivastava | @spriha
Published 10:19 AM ET Mon, 25 March 2019 Updated 4:11 PM ET Mon, 25 March 2019
CNBC.com
Last week, the yield on the U.S. 10-year Treasury note dipped below the yield on the 3-month paper.
The yield curve — which plots bond yields from shortest maturity to highest and is considered a barometer of economic sentiment — inverted on Friday for the first time since mid-2007.
Now that one of the most reliable recession indicators in the market got triggered, investors across the globe are starting to worry if this could mean the U.S. economy is slowing down.
The yield on theU.S. 10-year Treasury noteon Friday dipped below the yield on the 3-month paper. It was the first time since mid-2007 that the yield curve — which plots bond yields from shortest maturity to highest and is considered a barometer of economic sentiment — inverted.
