ZSE gained $400m in post-budget trade

THE Zimbabwe Stock Exchange (ZSE) on Friday put on $400 million, coming off three consecutive losses as the market reacted to Finance minister Mthuli Ncube’s maiden budget statement.
Last Thursday, the minister unveiled a budget that will see an increase in import duty for fuel while duty for selected goods — including motor vehicles — will now be charged in foreign currency.
The measures, which are meant to eliminate “arbitrage” and curb foreign currency leakages, are regrettably, also a harbinger for inflation, which has thus far provided fuel for the local bourse’s intermittent rallies.
The ZSE’s market capitalisation closed $402 million higher on Friday at $17,2 billion, coming off three successive down sessions which saw the All Share index lose 8,4 percent.
The market’s gains were the largest recorded for a single trading session in the past seven sessions.
It has over the past two years seen record breaking performances spurred by a monetary crisis, which has primarily been caused by the domestic creation of money through the transferable deposits platform.
Under the current monetary regime — a multi-currency system made up of only non-domestic currencies – financing a budget deficit should not be done through domestic credit as the government has been doing.
“Investors are wary of inflation, a sharp fall in exchange rates which has made liquid assets relatively less attractive and the immovability of foreign disposal as the major drivers of buying pressure,” analysts at research firm Equity Axis said of the market’s performance in a comment last week.
In October, the market jumped to a record $23 billion market capitalisation after Ncube’s shock announcement of a two percent tax on electronic transactions, coupled with the central bank’s introduction — on the same day — of separate foreign currency accounts meant to protect nostro dollars.
Since early October when the measures were announced, the broader economy’s reaction, along with the effects of the intensifying foreign currency shortages currently bedeviling the country, have sustained the market above last year’s record $15 billion capitalisation.
The market is expected to remain buoyant in the medium term as there has not been an apparent short term resolution to the monetary crisis spurring it.
“We expect the equities market to trade sideways in the medium term as valuations remain demanding and recommend only selective buying into weakness,” analysts at advisory firm IH Securities said in comment las