ZSE reflects on policy measures





Weakness persisted on the equities market with nearly $800 billion lost on the Zimbabwe Stock Exchange in the past two weeks on low demand as investors maintain a wait and see attitude following recent policy pronouncements.

The current market follows a raft of measures recently introduced by the Government targeting speculative activities and also to support currency stability.

A fortnight ago, the Government announced measures that included suspension of lending by banks — although this has since been lifted — in an effort to control money supply.

On the equities market, the Government reviewed the capital gains tax from a flat rate of 20 percent to 40 percent for shares held for a period less than 270 days.

Market watchers have hinted this would reduce participation especially by retail investors. 

In developments that reflect adjustments on the market, following policy measures announced by the Government about a fortnight ago, the amount of forex allotted on the Reserve Bank weekly has drastically fallen to way below US$10 million from an average of US$45 million.

Announcing the measures, President Mnangagwa directed the central bank to start allotting only foreign currency already in its coffers to avoid backlogs resulting from limited resources required to fund approved bids within the approved timelines.

Days after the pronouncement of the cocktail of policy interventions, Finance and Economic Development said the goal was to “prick” the bubble of speculative trading in currency and the equities market.

Speculation in the market is part of a cocktail of malpractices by various economic agents driving sustained depreciation of the local currency on the black market, which has fuelled inflation re-resurgent. 

However, authorities also blame the negative impact of the war in Ukraine, which has driven prices of key commodities like fuel, crude cooking oil and fertiliser to unprecedented levels in decades, pushing global inflation.

“On this backdrop, we are likely going to experience reduced activity on the Zimbabwe Stock Exchange.

“We anticipate net selling on the bourse as there are high chances speculators and arbitrageurs will start exiting the market. We are of the view investors will return to valuation fundamentals as ‘bad money’ leaves the market,” said stockbrokers IH Securities.

In the past two weeks, the market has seen declines led by heavy caps, which resulted in investors incurring over $742 billion in cumulative losses. Total market value declined to $2,382 trillion from $3,82 trillion a fortnight ago.

In the past two weeks, the market’s heavy cap, the ZSE Top 10 Index, has retreated by 25 percent to 13 364 points from 18 044 points as weakness persisted. 

By close of Monday trades, the index had registered pockets of gains with a marginal 0,04 percent increase recorded over the previous session.

Property firm Mashonaland Holdings highlighted Monday’s trading session as 20,29 million shares worth $81,17 million exchanged hands. 

The shares represented 92,76 percent of the total volumes that traded and 29,66 percent of the value outturn.

Other notable value drivers of the day were Econet, Delta and Innscor, which contributed 50,17 percent to the aggregate. 

Volume of shares traded ballooned 1415,52 percent to 21,88 million as turnover jumped 77,04 percent to $274,58 million.

On the downside, banking group NMB was the major casualty of the day with a 14,93 percent dip to end at $29,35. 

TSL dropped 13,24 percent to settle at $85,02 while NTS trimmed 12,2 percent to $12. Property concern FMP came off 12,18 percent to $6,13 as Zimplow capped the top five shakers on a 8,49 percent retreat to $23,42.

Market watchers are however of the view it’s not all doom and gloom with Government’s goal to restore confidence, stabilise and unify exchange rate as well as rein in inflation.

“While these measures are still in place, we believe the intended objectives could be achieved,” said IH.

Inflation, however, might keep increasing given the country is still susceptible to global inflation as power and fuel prices remain elevated while economic growth prospects are also dependent on currency stability, moderate inflation and policy stability.

Year to date the parallel rate has deteriorated by 88 percent to US$1:$405.  – Herald