Omega Ukama 
THE Zimbabwe Stock Exchange (ZSE) suffered its biggest loss in more than three years last month after shedding $722 billion to end with a market capitalisation of $2,89 trillion.
This follows the bourse’s huge knock following President Emmerson Mnangagwa’s economic measures that were, in part, meant to deter speculation on the market, which authorities say has been stoking inflation.
ZSE chief executive, Justin Bgoni
The market’s year-to-date gains, which had reached 168 percent at the end of April, closed the month at 110 percent.
Mnangagwa pronounced the measures at a time the market had been rallying with renewed vigour, on resurgent inflationary pressures in the economy, with the market’s capitalisation having grown by $1,8 trillion to $3,79 trillion in April.
The ZSE has over the past few years rallied on high inflation, which rose to 131,7 percent in May from 96,4 percent in April, and 60,74 percent last December. Among other measures meant to arrest the runaway inflation, Mnangagwa raised capital gains tax on shares held for less than 270 days from two percent to four percent, saying this will deter short-term speculation on the market.
The president also banned inter-account transfers between brokers and their clients. Third party funding of client sub-accounts was also banned and transfers out of a client sub-account shall only be allowed to the customer’s bank account and not to third parties.
Analysts had warned that the measures would “depress” the market.
“These … measures will have a negative impact on the stock market as avid investors opt for other safe havens, preferably the greenback,” local research firm, Equity Axis, said in a note.
Investment analyst Enock Rukarwa said the new measures were reminiscent of recent statutory interference, which hurt confidence in the market.
“Historically, government intervention on the stock market has been suboptimal as opposed to developmental, taking stock of 2019 market suspensions, fungibility suspensions and so on.
“A snapshot of the past three years is showing waning foreign investor participation, an additional cost to the current setup will further worsen foreign participation prospects,” Rukarwa told The Financial Gazette.
An investment analyst at IH Securities, Lloyd Mlotshwa, said while the government was within its right to hold capital markets to account, “there is a disproportionate focus on the stock market as a driver of macro-economic dislocations”.
Mnangagwa also gave the ZSE powers to undertake regular and continuous monitoring of broker transactions, share trading and custodial changes.
For this purpose, an electronic system will be established “urgently”.
