ZSE in forecast busting show

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THE value of shares traded on the Zimbabwe Stock Exchange (ZSE) during the 10 months to October hit a record high of $715 million, official data has shown.
This amount was $20 million higher than the $695 million notched by the ZSE during the full year ended December 31, 2017, and is the highest ever turnover reported by the domestic bourse since February 2009, when the exchange was rebased.
The local equities market has over the past two years intermittently surged despite a deterioration of economic fundamentals, headlined in 2018 by pre-election anxiety and a post-election monetary crisis.
Driven by a dramatic deterioration in parallel market rates for the local currency against major currencies, the ZSE recorded its highest monthly turnover last month at $161 million.
The ZSE statistics indicate that the value of stocks traded during the first 10 months of 2018 was 73 percent higher than the $412 million recorded during the same period last year.
The market’s activity over the 10 months was forecast busting as analysts had not expected turnover to surpass 2017 levels.
“The market’s turnover in 2018 is unlikely to surpass value traded in 2017…which followed economic underpinnings which are not likely to resurface,” researchers at advisory firm, Equity Axis, said earlier this year.
Analysts have attributed the high activity on the stock market since 2016 to the country’s monetary crisis, which has been characterised by currency risk and inflationary pressures.
Treasury and the central bank say the crisis has been caused by the disparity between money supply and cash deposits as government has relied on domestic credit to finance an increasing budget deficit.
They say financing of the deficit under dollarisation should be from foreign sources to mitigate domestic money creation.
Amid the monetary dysfunctions, the stock market has become a safe haven for investors and other economic players as bond notes and transferable deposits have lost value against the greenback. Analysts say it is this “flight to safety” that has created interest in stocks.
Even though market activity this year was not expected to surpass 2017 levels, forecasts were generally high on account of an election year.
At $486 million, the market’s turnover in 2013, which was an election year, had been the post dollarisation record before the start of the bourse’s dramatic swings in 2016, after the introduction of the bond notes — a surrogate currency said to be backed by a facility from the African Export-Import Bank.
Foreign purchases gained for the third consecutive month in October, coming in at $45 million, up from $22 million in September. Foreign disposals more than doubled to $67 million in October, from $23 million in September.