LIVINGSTONE MARUFU
The Zimbabwe Stock Exchange (ZSE) this week breached the ZWL$2 trillion market capitalisation value fuelled by rising inflation and currency volatility, Business Times can report.
The ZSE market cap hit ZWL$2 001 525 327 217,00 on Tuesday.
The All Share index gained as much as 0.54% to close at 16 185.27 points while Top 10 gained 0.30% to close at 10 7704.52 points.
Small Cap and medium cap indices registered gains of 0.89% and 1.29% to close at 403 032.67points and 26 6 73,32 points, respectively.
In the month of March stocks rose 5,79%.
Investment analysts told Business Times that high inflation was pushing equity prices upwards as investors want to hedge against loss of value.
Annual inflation for the month of March stood at 72,7% from 66,1% in February, resulting in investors rushing to the local bourse as its safe haven status proved to be appealing in uncertain times.
“The country has been experiencing high inflation and the market capitalisation has been on a constant upwards movement as most investors move to offload the local currency by buying shares.
“We continue to witness the vicious cycle of high inflation therefore the investors want stocks to hedge (against) inflation,” a stockbroker who preferred anonymity told Business Times.
In its 2022 Economic Outlook report, research firm Morgan & Co projects the ZSE market capitalisation to hit ZWL$3 trillion this year as inflation continues to ravage the economy.
“The bourse will be the most feasible option to preserve value on Zimbabwean capital markets as cash and money market instruments are not the best option given that there is a higher expectation of deterioration in inflation fundamentals,” Morgan & Co said.
The report said the financial services sector remained attractive and foresees potential upswings and corrections in the market.
The consumer sector also remains an interesting division given the defensive nature of food , according to the report.
Morgan & Co said the real estate or property sector remains predominantly a US$ asset in Zimbabwe and presents liquidity constraints for medium-term investors.
The Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said the central bank was putting in place measures to tame inflation to bring stability in the economy.
This week, Mangudya, raised the bank police interest rate to 80% per annum from 60% to curb speculative borrowing, among a raft of measures to contain inflation.
“We have a high velocity (of the Zimbabwe dollar).
“Downside risk is that higher velocity of local currency money also increases inflation as consumers rapidly spend their money. Strong aggregate demand in the national economy is driven mainly by the use of the local currency due to its high money velocity,” Mangudya said.
Despite the central bank measures, inflation continues to outperform monetary authorities strategies.
