IH SECURITIES (IH), a local financial services firm, says it expects Zimbabwe’s dollarisation to continue in the foreseeable future despite authorities’ efforts to promote the domestic unit.
This comes after the Zimbabwe Statistics Agency (Zimstats) recently revealed that 75 percent of domestic transactions are now being conducted in foreign currency.
“Going forward, the theme of dollarisation within the economy is expected to sustain… part of the wage reviews for civil servants have applied to the US$ portion with the lowest paid worker now earning US$250,” IH said in a recent note.
IH also noted that currency depreciation in the month under review also impacted the Zimbabwe Stock Exchange (ZSE), keeping the growth of the local bourse nearly stagnant at 1,5 percent.
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“While activity was weaker in March, the ZSE witnessed improvement in market cap as it grew 36 percent within the period to $3,36 trillion from the $2,4 trillion registered in February.
“However, the local currency experienced headwinds, depreciating 34 percent within the month under review and as a result, the performance of the bourse in real terms was diluted to a growth of 1,5 percent,” IH Securities said.
“Average daily value traded for March slowed from an equivalent of US$820 000 in February to US$480 000, while total volumes reduced 70 percent to 96,71 million.
“Accounting for the delisting of Axia and Innscor, market capitalisation for the bourse grew 110 percent in nominal terms versus a currency depreciation of 81 percent for the first quarter of the year pointing to real growth of 30 percent.”
IH is of the view that a strong correlation between money supply and stock market performance will continue to be seen, with the uncertainty around money supply developments in 2023 propelling the country to lean more towards defensive stocks that have strong dividend policies in case capital gains remain subdued.
Concerning the Victoria Falls Stock Exchange (VFEX), IH says the market has seen increased activity in the first quarter, with new listings from conglomerate Innscor Africa and Axia taking the market cap of the exchange from US$608 million to a billion-dollar valuation.
“Market cap within the month traded down 8,2 percent to US$1,03 billion weighed down by negative performances in six of the nine listings. Caledonia was the top gainer in March, gaining 20 percent. Average daily traded for the exchange in March registered at US$35,673 versus US$31,776 in February, signifying a slight uptick in liquidity. Shares trading hands however decreased 32 percent month-on-month to 2,99 million.
“Going forward, the exchange has a steady pipeline of new listings in the banking sector, property segment and bond offerings.
“We expect increased liquidity going in the short term from dividend remittances being re-invested into the exchange,” the local financial services firm said.
“On a one-year rolling basis, the VFEX All Share Index has outperformed its peer and has provided the better store of value within the period.”
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