Stocks spike on currency volatility

THE Zimbabwe Stock Exchange (ZSE) has seen a roaring start to 2024, with the All Share Index surging 20,53 percent since the new year’s bell.
This rally however, analysts say, is fuelled by a desperate scramble for shelter from Zimbabwe’s turbulent currency.
The Zimdollar’s recent nosedive on the parallel market, a trend that began during the festive season, has sent investors flocking to stocks as a hedge against inflation and devaluation.
This phenomenon is not new to the ZSE. For years, the market has served as a refuge, with investors seeking solace in the relative stability of equities.
Nivteil Capital Investment analyst, Malvin Chidzonga, described the market’s current surge as simply “repricing of stock due to currency depreciation and inflation build-up”.

This is all happening in the near-absence of foreign investors.
Despite their significant contribution to the market’s 4 500 percent boom in 2021, foreign investors have turned their backs on Zimbabwe, recording a net disposal of $39 billion in 2023.
Analysts attribute this exodus to a toxic cocktail of unfavourable policies.
Chief investment officer at Imara Asset Management Zimbabwe, Shelton Sibanda, painted a bleak picture at a recent conference: “Without reforms, particularly respect for rule of law, property rights, foreign exchange deregulation, and anti-corruption enforcement, foreigners will continue to avoid the local bourse.”
He further warned, “Rebuilding trust will be a slow process, and we shouldn’t expect substantial foreign investment in the near future.”
These concerns hold water. The regulatory measures implemented in 2022, aimed at curbing speculation, have instead choked the life out of the market.
Inter-account transfer restrictions and a hefty capital gains tax have sent chills down the spines of foreign investors, pushing them towards the Reserve Bank of Zimbabwe’s currency auction system as their preferred exit route.
The consequences of this exodus are evident.
Foreign activity on the ZSE now represents a mere 6,5 percent of the exchange’s total turnover, a far cry from its former glory.
The All Share Index’s 800 percent year-on-year gains in 2023 pale in comparison to the dizzying heights of 2021, marking the exchange’s longest slump since 2016.
Meanwhile, a worrying trend has emerged within Zimbabwe’s investment landscape.
The key insurance and pensions sector, traditionally a stalwart supporter of listed equities, has dramatically reduced its exposure.
newsdesk@fingaz.co