11 Jul

Investor flight spurs equities’ H1 rally

THE Zimbabwe Stock Exchange (ZSE) witnessed a rally during the first half of the year as investors, fearing loss of value after the introduction of bond notes last November, sought refuge in equities.
The rally on the ZSE is seen continuing during the second half of the year as investors and asset managers seek safety amid growing inflation concerns.
Zimbabwe’s inflation remains on an upward trajectory, rising for the fourth consecutive month in May due to price increases caused largely by worsening foreign currency shortages and an injection of liquidity in the market through Treasury Bills and the real time gross settlement (RTGS), which critics have said is a new form of money printing by President Robert Mugabe’s government.
The US dollar was reportedly attracting a premium of between 15 and 20 percent to either bond notes, a domestic currency introduced by the Reserve Bank of Zimbabwe (RBZ) to deal with cash shortages, or bank transfers, which are denominated in US dollars, but are essentially a phony currency created through the RTGS.
Amid rising inflation concerns, the stock market is becoming a safe haven for individuals, companies and asset managers.
Analysts said increased scepticism over Zimbabwe’s currency crisis would continue to give impetus to a buying spree on the ZSE, which has witnessed its longest upward swing since November last year.
With interest rates now under cap after an RBZ order to lower lending rates last year, investors have also been taking positions in equities.
Falling money market rates and a depressed property market have also fuelled the equity market’s bull run.
The ZSE’s industrial index advanced 35,6 percent during the first half of the year.
It closed the month of June at 195,97 points, while the mining index rose 19,28 percent to 69,79 points.
On a year-on-year basis, the industrial index gained 94 percent while the mining index gained 182,55 percent.
The volume of shares traded on the local bourse increased to 917,6 million shares, from 630,4 million shares recorded in the comparable period last year.
Market capitalisation rose by 104,79 percent year-on-year to $5,7 billion, while in the half year it increased by 42,1 percent.
Total market turnover recorded in the first half increased by 28,84 percent to $115 million from $89,3 million recorded last year.

Read more : Financial Gazzette