THE Zimbabwe Stock Exchange (ZSE) lost 2,83 percent in August, its worst performance in nine months, as demand for stocks continues to diminish amid sustained stability in the economy.
Over the past few years, the market has rallied on the back of currency instability, with demand for real assets driving interest in equities.
But since June 2020, policies put in place by the monetary authorities have seen inflation falling from a peak of 838 percent last July to 50 percent last month, with a US$1 billion stimulus package from the International Monetary Fund rousing optimism of a further decline.
The ZSE benchmark All Share Index closed August at 6 652,31 points as its year-to-date gains shrunk to 1552 percent compared to 159 percent at the end of July. In market capitalisation terms, the market lost $8 billion during the month to end at $797 billion.
This comes as market analysts have been warning that the market is now overvalued.
“Amid a stellar performance from the ZSE the past three halves, with the exchange outperforming most of its African peers, we are of the view that the market has reached fair value at current levels and is faced with a likely profit taking period as other asset classes become more attractive post the hyperinflationary period,” IH Securities said in a recent note.
“We are cautiously optimistic that inflation will remain on a downward trajectory, provided that the discipline displayed in the first half of the year is maintained; however key risks that could potentially see the country overshoot the set inflation targets include unpredictable imported inflationary pressures on domestic pricing and financing of the remaining harvest, with only 733 000 tonnes of grain delivered to the GMB against an expected 1,8 million tonnes.”
In his mid-term budget review presentation in Parliament last month, Finance minister Mthuli Ncube said annual inflation is expected to further decline to between 22 percent and 35 percent by December 2021.
This comes as the central bank has reduced its quarterly reserve money growth target from 22,5 percent to 20 percent to maintain stability.
The apex bank’s monetary targeting framework has been anchored on open market operations (OMO) — issuing and redeeming securities to regulate money supply in the economy.
Meanwhile, the ZSE yesterday introduced a Modified Consumer Staples Index. The new Index is constituted of 10 counters including Innscor Africa, Delta Corporation and Simbisa Brands.
“As we stated before, the exchange is continuously developing new Indices to be used for specific purposes and to guide investors,” chief executive Justin Bgoni said on Tuesday in a statement announcing the Index.
A stock market index is an aggregate value produced by combining several counters together and expressing their total values against a base value from a specific date.