TURNOVER worth US$32,7 million has been recorded on the Zimbabwe Stock Exchange (ZSE) since the market started trading in the US dollars.
Figures to hand show that since February 19 to May 15, a total of US$32,7 million changed hands, a sign of improving real liquidity in the economy and confidence in the prospects of future earnings as many companies are trading at values depicting huge discounts if one considers six months to a year of continuous political stability and policy consistency.
The money however is not a reliable barometer to gauge the economyâ€™s performance.
â€œIt is money that is benefiting individuals and some companies. The shareholders are the ones who determine where they want to invest their money,â€ an analyst told businessdigest.
Stock market analysts said most investors who â€œmake money on the stock exchangeâ€ were not investing in Zimbabwe as there were limited investment options, which are offering low returns when compared to the region.
The stock market, a barometer of confidence in an economy that has no other known measures of business confidence, has been bullish over the past month. The bullish trend, however, cannot be compared to the mad bulls that characterised 2007 and 2008 on the back of excessive broad money supply growth from a currency that has since died a natural death.
Between 2004 and early 2009, the ZSE surged and contracted on the whims of market liquidity cond itions. These excessive liquidity conditions emanated from surplus positions on the money market from â€œsanctions bursting activitiesâ€, Aspef, Bacossi facilities and other laxative sterilisation strategies of the RBZ that drove the stock market to new records daily, which records were meaningless when converted to real value creation.
â€œThat era has passed, and with little doubt, government and the Reserve Bank have little influence in determining the direction of the stock market on a daily basis as before,â€ economist Brains Muchemwa told businessdigest.
Muchemwa said liquidity conditions at present play a major role as before, with more inflows into the economy translating into share prices gravitating towards their realistic values.
â€œThe major difference however is that the current liquidity inflows are emanating from real economic activities compared to irrational explosion of monetary exuberance of the past. All major sources of liquidity inflows into the economy are showing a positive trajectory, from donor funds via exports to external lines of credit flowing in,â€ he said.
â€œThese are the sources of liquidity that will be more important in oiling the operations of the stock market from the primary trading perspective, whilst constructive impact of these flows on the real economy through increasing productive capacity and bolstering purchasing power reinforces the secondary value perception of listed companies,â€ Muchemwa said. Â
Muchemwa said major economic indicators were pointing to a brighter future ahead for Zimbabwe, although the major debate would be on how bright things are going to be. â€œGross Domestic Product growth rate, having contracted by another 14% in 2008, is set to rise this year on the back of tangible reforms,â€ he said.
The disastrous impact of excessive money printing, illogical price controls and fixed exchange rate that characterised the foundations of the chaotic policy making framework of the past have silently been replaced by a silent and steadfast dollarised economy that is self-regulating.
Meanwhile activity on the money market remained subdued during the week as inflows go into the real sector or in those financial markets where rewards are high such as the equities market.
BY PAUL NYAKAZEYA