LIVINGSTONE MARUFU
The Zimbabwe Stock Exchange (ZSE) gained ZWL$6.33 trillion during the first 12 days of June to ZWL$14.61trillion fuelled by excess liquidity in the market and high inflation.
At the beginning of the month, the market cap was ZWL$3.48 trillion.
Investment analysts expect the bullish sentiments to persist, largely due to inflationary pressures.
They said high inflation was pushing equity prices upwards as investors want to hedge against loss of value.
Marks & Associates insights and research director Batanai Matsika told Business Times that the bullish sentiment will continue on the ZSE as long as the ZWL$ continues to plummet.
“The ZWL$ continues to devalue against the US$ and the stock market continues to rerate in tandem with the inflation and devaluation of the local currency.
“The bull run is expected to continue as long as the inflation persists unless there is a stop to the ravaging inflation,” Matsika said.
He said there was also an indication of excess liquidity in the market over the past months hence with the increase in money supply growth the stock market tends to react in line with the amount of money in the economy.
Investment analysts said the financial services sector remained attractive and foresees potential upswings and corrections in the market.
Also, the consumer sector remains an interesting division given the defensive nature of food.
Analysts say the bull run is characterised by optimism and investor confidence but in this case, the bourse is reacting to money supply growth in the economy.
A stockbroker who commented on the condition of anonymity said: “We continue to witness the vicious cycle of high inflation therefore the investors want stocks to hedge (against) inflation,” the stockbroker said.
Stockbrokers recently said the real estate or property sector remains predominantly a US$ asset in Zimbabwe and presents liquidity constraints for medium-term investors.
They anticipate a general bullish sentiment to prevail in the stock market.
However, they are urging investors to consider companies with diverse business models, inflation-hedging capabilities, and foreign currency generation capacity, in the counter-selection process.
