Zimbabwe Stock Exchange (ZSE) market value yesterday hit ZWL$1.4 trillion for the first time in history, lifted by increased money supply, Business Times can report.
In January this year, the bourse’s market capitalisation was ZWL$317bn.
But, it surged 342% to hit ZWL$1.4 trillion this week.
The massive surge also comes as investors have been buying stocks to preserve value.
Market analyst Thedius Kasaira told Business Times that the massive uptick was due to availability of liquidity in the market and inflationary pressures.
“The market has had a run on the back of improved liquidity after the liquidation of Econet debentures and as well as injection of more cash in the system by the government for buying grains, maize and wheat. Inflation on the ground is also on the rise and people don’t want to keep cash,” Kasaira said.
Another analyst Evonia Muzondo said the current market capitalisation has been an issue of increased money supply that has been chasing both the stocks and the exchange rate.
This has seen people buying assets in the form of shares to preserve value as the environment points to a negative inflation.
“Increase in money supply, in recent months, chasing both shares and the exchange rate and if the exchange rate moves, people buy assets like shares to preserve value because it points to a negative inflation outlook,” Muzondo said.
An investment analyst who requested anonymity told Business Times that the current market capitalisation may be a result of the recent clampdown on parallel market activities where some of that money is possibly finding a temporary home on the ZSE.
“It may be driven once again by the need to hedge value in an environment where inflation concerns are gathering momentum with the plummeting of the local currency.
“The future of the local currency is once again in question and having an exposure in equities has proven historically to cap losses. In addition, given the heavy clampdown of the government on parallel market activities some of that money is possibly finding a temporary home on the ZSE,” the investment analyst said.