MARKET capitalisation on the Zimbabwe Stock Exchange (ZSE) slid by 6,28% between January and June 2014, according to latest Reserve Bank of Zimbabwe (RBZ) figures, with analysts attributing the negative performance mostly to the liquidity crisis gripping the economy.
The latest RBZ monthly report for June 2014 shows market capitalisation closed the month at US$4,87 billion.
Econometer Global Capital (Econometer) head of research Takunda Mugaga said market capitalisation went down due to of the liquidity crunch, coupled with other macroeconomic challenges buffeting the economy.
“There is a strong relationship between liquidity and market growth and one of the issues is market expectation,” Mugaga said, adding the market has no confidence in the current policy framework.
He said the market is generally pessimistic because of the prevailing economic environment where companies are struggling, with profitability actually shrinking compared to last year for a number of counters while some are closing down.
“Volumes are also thin and driven by basically seven companies that are trading and companies are closing every day,” added Mugaga.
According to the RBZ report, market capitalisation on the ZSE increased by 8,66% on a month on month basis to US$4, 87 billion at the end of June, up from US$4,49 billion at the close of May 2014, reflecting of increases in the prices of heavily capitalised shares.
The central bank said the ZSE continued on an upward trend in June 2014, despite the continuing liquidity challenges.
RBZ said the volume of shares traded further declined by 24,31%, from 235,8 million shares in May 2014 to 178,47 million shares in June 2014.
“Total turnover concomitantly declined by 20,74%, weighed down by thin trading volumes, to close the month under review at US$28,55 million,” said RBZ.
According to the report, the ZSE’s industrial index increased by 6,68%, to close at 186,57 points during the period under review.
The industrial index continued to reversing its year to date losses by gaining 7,63% in June 2014 while the mining index gained 72,98%, to close at 61,32 points in June 2014, from 35,45 points in May.
The mining index gained 33,92%, on a year to date basis.
“The gains emanated largely from a 118,18% growth in the share price of Bindura Nickel Mine, from US2,20 cents in May to US4,80 cents in June 2014. This was underpinned by an operating profit of US$17,3 million for the financial year ending March 2014, against an operating loss of US$13,1 million in 2013,” said the report.
In its 2014 half year economic analysis, Econometer said the lack of financial resources has delayed modernisation of the ZSE with most counters hardly trading while a few selected well-capitalised counters such as Delta Corporation, Econet Wireless, Innscor Africa Limited, Old Mutual, Seedco, British American Tobacco-Zimbabwe, Hippo Valley and to a certain extent OK Zimbabwe had been setting the pace for the market.
“With quantitative easing on the hold, especially in Washington, a thin number of fund managers will be seen scouting for prospects in low value market like that of Zimbabwe. The complete absence of new listings on the local bourse while there are prospects for delisting on a number of quoted stocks is evidence of how the capital markets in Zimbabwe are becoming shallower contrary to what was the case a decade ago,” said Econometer.
“No new listings are expected in the next 18 months with an average of two counters expected to delist on the corresponding period. The new regulations compelling stocks to release financials quarterly can only help to toughen the business environment considering the vacillation trends of business in Zimbabwe.”