PHILLIMON MHLANGA
The relentless decline of the value of stocks at the Zimbabwe Stock Exchange (ZSE) over the past few weeks has burnt investors and accelerated the sell-off at the local bourse, Business Times can report.
The stock market picked up speed this week accelerating its free fall due to growing concerns about the government’s contractionary stance, and investors now appear to be more inclined to sell now than to wait.
ZSE has suffered the biggest retreat since 2019 when Zimbabwe re-introduced the Zimbabwe dollar. The stock market is now down 39.2% or lost ZWL$6 trillion from its June 19,2023 peak of ZWL$15.3 trillion to ZWL$9.3 trillion yesterday.
This means the ZSE is now officially in bear market territory, which is defined as a fall of at least 20%.
The biggest declines were blue chip stocks. Zimbabwe’s biggest cigarettes maker, British American Tobacco lost ZWL$965.71 to close at ZWL$16 499.00 while financial services group, FBC Holdings eased ZWL$152.91 to close at ZWL$890.99.
Seed producer, Seed Co shed ZWL$94.51 to close at ZWL$1 546.29 while NMBZ Holdings and CBZ Holdings retreated by ZWL$12.55 and ZWL$10.00 to close at ZWL$160.00 and ZWL$800.00 respectively.
However, there were surprise beneficiaries as there was little positive news with the country’s largest mobile telecommunications network operator, Econet Wireless Zimbabwe gaining ZWL$12.99 to close at ZWL$513.02 while Meikles Limited went further up by ZWL$5.66 to close at ZWL$760.85. Zimre Holdings was ZWL$3.35 stronger to close at ZWL$70.00.
Analysts said government’s contractionary policy stance has seen Zimbabwe hit by a severe liquidity crisis.
They said it is creating a sense that there would be a continued free fall of stocks in this second half of the year.
Market analysts have blamed the free fall and the force of market sell-off on the contractionary policy.
“The bearish sentiment on the stock market has been predominantly due to thin liquidity conditions within the economy. Due to depreciation of the United States dollar locally as an alternative and substitute investment option to equities we have seen increasing interest from investors in this instrument as opposed to stocks. As long as the government can sustain its prudential fiscal policy measures and a contractionary stance we are likely to see continued free fall of the stock market,” an investment expert, Enock Rukarwa told Business Times.
An investment analyst, who preferred anonymity, told Business Times: “Concerning market confidence, I am more worried about the psychological impact.”
Analysts noted that because of liquidity restrictions, the ZSE’s performance has largely lagged behind inflation and exchange rate trends.
The bourse, however, houses a variety of fundamentally sound investment options, which gives investors the chance to amass quality stocks at reduced prices.
Analysts predict that investors will continue to be cautious as we approach elections and the second half of the year, which could lead to more selling pressure.
