HomeBusiness DigestStocks likely to surge post-polls

Stocks likely to surge post-polls

By Kuda Chideme

Stocks are seen surging post the election period should government fail to introduce measures that will see the premium for the US dollar against the local currency being reduced or eliminated.

Zimbabwe is battling a liquidity crunch which has seen individuals and companies sourcing foreign currency on the black market.

Increased demand for foreign currency and the general view that the central bank has been flooding the market with new money in the form of Real-Time Gross Settlement (RTGS) balances has resulted in street traders placing a premium of up to 100% on the greenback.

Analysts say the market will jump if the country holds a free and fair poll in a fortnight.

The southern African nation will hold watershed elections, which will be the first without former leader Robert Mugabe, whose disastrous policies left the economy in ruin.
Mugabe was last year forced to resign by the military which facilitated the ascension of his former deputy Emmerson Mnangagwa, who is viewed by some as more pragmatic and business friendly.

“The market is in sympathy with the exchange rates on the parallel market. The growth we are seeing is not being driven by market fundamentals but it is a reflection of the fall in value of RTGS balances in comparison to the US dollar,” analyst Itai Chirume told businessdigest.

“In the period leading to elections we have witnessed growth in money supply. There have been increases in salaries for nurses and soldiers and spending for elections which have all contributed to the increase in money supply.”

Chirume said the bull run on the Zimbabwe Stock Exchange (ZSE) is expected to continue in the countdown to elections.

“A reversal would only happen if there is a massive injection of hard currency which would destabilise the parallel market and cushion the value of RTGS”.

Recent Posts

Stories you will enjoy

Recommended reading