The Zimbabwe Stock Exchange market capitalisation plunged to US$3,8 billion in the first half of 2015 after losing US$1 billion in valuation, mirroring an economy some analysts warn could slip into recession this year.
Turnover was down 41,69% to US$137 million in the six months to June 30, from US$234 million recorded during the same period last year. The benchmark industrial index stood at 148,40 points as at June 30, its worst since December 19, 2012 when it ebbed to 148,12 points ahead of the July 2013 general election controversially won by President Robert Mugabe and Zanu PF. The industrial index is down 8,84% year-on-year, denting market expectations of a recovery following a poor performance at the close of 2014.
The resources index has shed 38,22% to 44,30 points since the start of the year. The dismal half-year equities report comes ahead of two policy announcements — the mid-term fiscal policy and the monetary policy statement — which analysts do not expect to give impetus to an economy characterised by poor output from the anchor agriculture sector, declining aggregate demand as unemployment surges and low foreign direct investment inflows.
“The underperformance (of the stock market) could reflect fatigue on the average risk averse investor as the economy continues to underperform,” MMC Capital said in a research note.
“A sustainable stimulus would be the recovery of the economy which would improve aggregate demand anchored on industrial productivity and a policy shift.”
Foreign participation declined by 52,46% with foreigners buying US$70,5 million worth of shares down from US$148,3 million over the same period last year.
The weakening economy has seen most companies reporting negative earnings. During the period under review 35 out of the 60 actively listed firms were in the red while only 14 registered positive growth.
“The recent results reflect the general state of the economy. We do not expect the economy to recover in the short term and expect corporate earnings to come under increased pressure,” said Invictus Capital in its research note for May.
“Zimbabwe is at risk of falling into a deflationary trap unless something is done to revive the economy. Zimbabwe needs to focus on attracting investment and improving the business environment. It needs to restore business and investor confidence.”
Market watchers also blame lack of clarity around the indigenisation policy, which compels foreign investors to sell controlling stakes to locals, structural weaknesses in the economy as well as the cost of doing business in Zimbabwe for the underperformance of the bourse.
Government has attempted to tone down its rhetoric on the empowerment law but this has yielded little activity.
“Notable stocks to drag the market lower were Econet down 33,33% to 40 cents. We believe the drop in Econet’s share price was largely a price correction in line with the Group’s reduced profit margins. PPC was also on the downside, with the counter losing 31,42% to 120 cents,” said Lynton-Edwards Securities in its equities report for the first half of the year.