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Zimbabwean Markets Rebounds Strongly in Second Quarter on Stable Currency

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HARARE,- After a sluggish start to the year with modest single-digit gains, the Zimbabwe Stock Exchange (ZSE) experienced a significant turnaround in the second quarter of 2024, posting impressive gains.

In the first quarter ending March 2024, the ZSE All Share Index rose by 6.18 percent, and the ZSE Top Ten Index increased by 6.8 percent. However, these nominal gains were overshadowed by the year-on-year blended inflation rate of 55.3 percent and the Zimbabwe dollar losing more than 90 percent of its value, resulting in negative real returns for investors.

The second quarter brought a dramatic improvement, coinciding with the introduction of a new currency, which stabilized inflation and exchange rates. This stability boosted investor confidence, leading to substantial gains in the market. By the end of June, the ZSE All Share Index had surged by 28.64 percent, while the Top 10 Index soared by 35.92 percent.

Leading this upturn were stocks such as Fidelity Life, which saw a remarkable increase of 141.4 percent to 105 ZiG cents, driven by property developments in Victoria Falls and Mazowe. Other notable performers included Afdis with a 108.86 percent gain, NTS with 95.21 percent, CBZ with 85.05 percent, and Unifreight with 67.83 percent.

Stockbroker and IH Securities Director Lloyd Mlotshwa attributed the rally to significant movements in Delta and Econet, the two largest stocks by market capitalization. With many companies migrating to the Victoria Falls Stock Exchange (VFEX), Delta and Econet have become primary targets for liquidity on the ZSE, significantly boosting the market’s overall capitalization.

“Both names are significantly up in real terms regardless of which rate you use since April/ZIG. Mathematically, that will push up your entire market capitalization,” Mlotshwa explained.

Financial analyst Sylvester Mupanduki noted that the introduction of a stable new currency has restored investor confidence, reducing inflation and currency uncertainties that previously plagued the market. “Now that inflation is under control, we should see more interest from investors in stocks, and that is what I think is currently driving the market,” he said.

Mupanduki added that economic stability has made financial forecasting more reliable, allowing for more accurate company cash flow predictions. He believes that the market is currently undervalued due to the stronger ZiG currency, attracting more investor interest.

Tatenda Nemaungwe, another market player, agreed, highlighting that shares on the ZSE are undervalued compared to regional counterparts and historical benchmarks. He noted that existing shareholders are now holding onto their shares, reducing supply and driving prices up until stocks are properly valued.

A stockbroker, speaking off the record, confirmed that the market currently has few sellers, with volumes not widespread but featuring several special deals.

The ZSE has remained bullish post-second quarter, closing Wednesday up 43.32 percent since April 8, the first trading day under the ZiG currency.

This resurgence in the ZSE underscores the positive impact of economic stability and investor confidence on market performance.

Source: Business Weekly