Investors suffer ZWL$2 trillion wipeout
PHILLIMON MHLANGA
The bear market rout has wiped off about ZWL$2 trillion of equity values since May this year, easily the most severe downturn on the Zimbabwe Stock Exchange (ZSE) in the past decade, Business Times can report.
The slump in stock prices has sent the ZSE, which has been very generous to investors since 2017 characterised by charging bulls in a familiar rallying cry, tumbling to about ZWL$1.5 trillion on Tuesday this week, putting it close to 60% below its peak of more than ZWL$3.4 trillion sometime in May this year.
In January ZSE market capitalisation was ZWL$1.3 trillion.
The current situation, which has reduced investors’ net worth, makes them nervous as the fall has been described as ‘nerve wracking’.
And there is panic selling in the market as the pain is spreading widely.
Multiple analysts said investors should not expect the bleeding to stop in the short-to medium term, a situation which is raising alarm bells.
The wipeout, is partly tied to the recent government interventions, liquidity constraints, and high inflation among other problems.
The heavy losses, were largely in blue chip counters also known as heavies or most valued companies listed on the ZSE, dragging the local bourse into a crisis.
The decline was attributed to largely tight monetary policy stance in the period under review, buttressed by continuous fiscal prudence.
Consequently, the ZSE is grappling with the impact of the recent government regulations meant to clamp down on speculative activities at the stock exchange as well as the plunging Zimbabwe dollar, liquidity constraints and high annual inflation, which closed September at 280.4%.
The Reserve Bank of Zimbabwe also introduced gold coins during the period under review, resulting in investors turning their back on the ZSE.
The gold coins have provided investors an alternative asset class and assisted government in mopping up excess liquidity in the market.
According to official data obtained from the Reserve Bank of Zimbabwe, a total of 9 516 gold coins valued at ZWL$9 billion were sold as at September 23, 2022 with 35% sold to individuals and 65% to corporates.
ZSE’s All Share Index shed more than 25% to close at about 13 600 points. The downturn was impacted by losses in conglomerate Innscor Africa Limited whose value plunged to ZWL$ZWL$270.09 while the country’s biggest brewer, Delta Corporation Limited eased to ZWL$204.42.
Another shaker was the country’s largest mobile telecommunications network operator, Econet Wireless Zimbabwe. Its share value also dropped to ZWL$90.02 while Ecocash Holdings fell to ZWL$49.82 during the reviewed period.
Howewer, there were few movers during the period under review.
The value of National Foods Holdings Limited and Mashonaland Holdings jumped to ZWL$1 200.00 and ZWL$72.00 respectively.
Meikles Limited also gained to ZWL$110.00.
Other gains were recorded in First Mutual Holding and First Capital Bank jumped to ZWL$27.53 and ZWL$10.29 respectively.
FBC Securities expects the bearish rout to persist. The stock broker also said the bear market presents equities buying opportunities to investors.
“We expect prolonged liquidity challenges to drive a bear sentiment on the market. We maintain the view that the bearish market presents buying opportunities in select counters that now appear undervalued, resulting in notable upside potential,” FBC Securities said.
