THE Zimbabwe Stock Exchange (ZSE) continued on a downward spiral yesterday as banks scrambled to offload their shares to cover financial positions. About 2
2% of the depositors’ funds with the banks are locked in shares. According to the Banking Act it is illegal for banks to own shares unless they are holding them as security against a loan.
Yesterday the industrial index dropped 4,26% while the mining index slipped 7,65%. On Wednesday the bourse lost 15%. Analysts say the market is likely to continue dropping in the short-term until banks have finished offloading their equity. Other analysts said this bearish trend was a result of shortages on the money market.
The money market was about $100 trillion short on Wednesday forcing some financial institutions to offload their shares to cover their positions.
“This past week has seen more sellers than buyers and there is more pressure on sellers than buyers,” said one analyst.
“It is interesting that the same way this bourse surges is usually the same way it falls,” he said.
Other analysts have attributed the fall to the recent power cuts, which they said was denting foreign investor confidence. Last year saw an increase in foreign investors coming on to the ZSE.
“Zimbabwe was hit the most by these regional power cuts, and this has seen some foreign investors pressing the panic button,” said a stock market broker.
Despite these developments some analysts still maintain that the increase in monetary supply will restore the buoyancy. “It’s only in the short-term, otherwise I believe very soon things will be back to normal,” said an analyst with a local asset management firm.