The All Share index lost 4,5 percent during the week to settle at 148,42 points as activity dropped by 94,5 percent from $233 million to $12,8 million.
THE Zimbabwe Stock Exchange (ZSE) cooled down last week as investors assumed a wait-and-see approach following various measures announced by the central bank in its Monetary Policy Statement (MPS). This is premium content. Subscribe to read article.
All the indices have recorded considerable slips since the statement a fortnight ago.
Over the past two years, the local bourse has been experiencing intermittent rallies spurred by deterioration of foreign currency exchange rates against bond notes and local bank balances on the parallel market.
Central bank governor John Mangudya’s floatation and redenomination of the bond notes and the local transferable deposits, in the preceding week was specifically targeted at addressing this currency crisis.
The All Share index lost 4,5 percent during the week to settle at 148,42 points as activity dropped by 94,5 percent from $233 million to $12,8 million.
“The market saw a much slower trading week activity-wise, even though the prior week’s numbers got a flattering boost from the housekeeping transactions by major shareholders in Econet and Cassava,” equities firm EFE Securities said in a note this week.
Still, activity was down 44 percent from the $23 million recorded during the week before the one where the Econet and Cassava transactions rocked the market.
“The week was more of a wait and see period for investors, stock values have up to this point tracked what happens on the grey market and the recent policy shift could change this,” said an equities analyst with a local bank.
“However, there have not been any signs yet that the official market will become the practical indicator for the market. Going forward, investors are always going to price in the most practical indicators, whether or not it’s going to be the official rate remains to be seen,” he said.
The newly introduced official interbank market quoted the new RTGS dollars at about 1:2,5 during week.
Mangudya says this rate is only the starting point for the market which will otherwise be “free-floating” going forward. However, market experts assert that as long as banks are mostly buying foreign currency from the central bank, the rate will not fluctuate much from the current levels.
“To start things off, we have sold some forex to the banks and we agreed on the margins with which they should offload it,” the governor said recently.
Analysts at local equities firm IH Securities, who believe that the official rate will eventually settle at 1:2,5, expect to see activity on the ZSE continue in the same way that it has been going lately.
“We expect rates to be volatile in the short term as market forces try to discover the true rate, which we believe will ultimately settle around the IH implied rate of 2,5.
“With the silence on interest rates and the ring fencing of foreign liabilities such as dividends and portfolio investments, we expect to see normal activity on the local bourse whilst foreign participants continuing to exit the market through fungible stocks such as Old mutual and PPC in the short term,” the advisory firm said in a note recently.
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