By Eben Mabunda
The Zimbabwe Stock Exchange (ZSE) All-Share Index (ASI) is the best performing on the continent having surged 226% on a year-to-date to September 30. The ZSE is trailed by the Ghanaian Stock Exchange (GSE) Composite at over 47% and the Lusaka Stock Exchange at over 26%. For comparison, the Johannesburg Stock Exchange — Africa’s most capitalised market is up about 8%.
According to African-markets.com, while these gains are indexed in the respective currencies, in US dollar terms, the ZSE ASI has surged over 230% ahead of the GSE at just over 40%.
As a caveat, the ZSE gains must be netted out for inflation — whose CPI has averaged 172% in 2021. Even after discounting inflation, the ZSE is still the best performing exchange on the continent, bolstered by systemic economic challenges in Zimbabwe.
In last week’s trade, the ZSE extended positive momentum, taking the record-breaking trajectory to a third consecutive week. The mainstream ZSE ASI notched by 9,75% to close at a new record high of 9 570,05 points.
In Tuesday’s session, the ZSE ASI inched 2,10% higher to close at 9 979,75 points.
Overall year-to-date returns scaled up to 263,01% as the parallel currency rate tumbled to lows of 180 to the US dollar. Penny stocks surpassed the 2 000% gain mark closing with a 2 075,09% gain, at the close of the week under review.
Equity Axis equities analyst Tinashe W Duma argues: “The situation has been exacerbated by the widening Zimdollar loss on the parallel market as well as the formal currency market. At the close of the most recent auction trading week, the Zimbabwean dollar plunged by -1,72% against the US dollar, and this is the widest loss since the beginning of the year.”
In the nine months to September 2021, the ZSE rallied by 226% vis-a-vis the 612% gains recorded in the comparative period of 2020. Gains in the prior-year period were mainly driven by inflation hedging amid hyperinflation. The 2021 performance has largely followed a similar northward trajectory.
However, the ZSE has seen a change in the underlying performances of listed companies. The latest financials for the period to June 30, 2021 are showing strong growth in volumes on Covid-19 recovery, which typically spurs earnings and bolsters valuations.
The ZSE top 10 companies continue to push upwards spurred by gains in Delta and BAT among others. Strong earnings released by Delta have helped sustain a rallying momentum for the overall bourse.
In 2018, the S&P Dow Jones removed Zimbabwean domiciled companies from 14 different indices which the firm tracks across Africa due to local inflationary pressures and forex shortages because such unresolved macroeconomic challenges would dampen the country’s ability to attract foreign investment.
In September, foreign inflows dipped by -91,69%, the widest decline since the beginning of the year.
Foreign inflows had surged by 50% in July before dipping by -21% in August. On the other hand, foreign outflows rose by a whopping 60,76% in September after a slump in the prior two respective months.
The recent sell-offs by foreign investors have been a factor of uncertainty as a slow-down in price movement was witnessed in August amid currency stabilisation.
With a market cap of ZW$1,2 trillion (US$ 11,93 billion), the ZSE bull run is expected to continue due to the unresolved deep running issues, especially as the country heads for its 2023 general elections.
Zimbabwean institutional and retail investors often take to the stock market for value preservation, faced with limited investment options as the money markets are performing sub-optimally vis-a-vis the worrisome inflation gripping the economy. The net effect will be a sustained run for the overall market.
- Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — firstname.lastname@example.org