PHILLIMON MHLANGA
After sharp losses at the beginning of the month, investors on the Zimbabwe Stock Exchange (ZSE) are now riding on a wave following a strong bull run hitting the runway with strong gains, Business Times can report.
The charge has seen a significant spike in the value of the stocks this month. Consequently, the local bourse notched fresh all-time highs, shrugging off Zimbabwe’s never ending economic crisis, which continues to suppress the prospects of real earnings growth.
The market gained about ZWL$105bn in value between January 1, 2021 and January 25, 2021 following a 33% spike in market capitalisation for the local bourse to ZWL$423bn from ZWL$317.9bn recorded December 31,2020.
Total turnover has been hovering around ZWL$130m daily on average in January.
This, according to analysts, has turned out to be the biggest financial bubble in a month, in the history of the local stock market.
A possible decisive factor behind the bullish trend on the stock market was the availability of liquidity in the market, according to investment analysts who spoke to Business Times this week.
They say there is a highly likelihood of a continuation of the rally until the end of the year because they believe there is likely to be a lot of upside in the market.
All the indices-the ZSE financials index, consumer discretionary, consumer stables, industrials, ICT, materials and real estate index- were all hovering in the positive territory throughout the month of January.
All shares closed at 3 521.68 points while the top 10 indexes closed at 2 246.11 points.
Top 15 and small caps closed at 2 624.18 points and 12 105.24 points respectively.
The medium cap stood at 7 292.78 point on Monday this week.
As of Monday, top gainers included Hippo Valley, Unifreight and First Mutual Life while Dawn, RTG and ZB Financial Holdings were some of the top losers during the month.
Analysts who spoke to Business Times this week said there were massive amounts of liquidity which had been sitting on the sidelines and was injected into the market.
Now, it’s finding its way onto the stock market.
“The market, in dollar terms, has been very cheap, meaning shares have been trading very low. There is too much liquidity, which has been sitting on the sidelines.
Now a lot of it is coming into the market. And I think the upside might will still be there until the end of the year,” an investment analyst who requested anonymity told Business Times.
Another investment analyst said: “There is a bit of liquidity that has come into the market. This has been pushing the market.”
The upside is happening at a time companies are experiencing low or no real growth in output as the new Covid-19 variant is ravaging the economy and has left companies struggling to stay afloat.
Government has imposed lock down restrictions as part of efforts to curb the spread of the virus which has been described as the number one threat to financial markets currently as foreign investors are becoming jittery on the uncertainty.
Risk-averse investors fear the Covid-19 outbreak could inflict serious damage on companies in Zimbabwe.
This resulted in foreign investors selling their stocks amounting to ZWL$50m daily on average and there were buys averaging as little as ZWL$390,000 worth of stocks daily.
The concern is that it can create a major shock for the markets as global trade have eased.
The Covid-19 pandemic has resulted in suppressed demand. Supply chains have also been severely impacted.
The virus continues to weigh down a possible recovery and growth.
Inflation is also still high at 406%, meaning the larger portion of corporate earnings which sent stock figures higher this month were facilitated on a larger scale by adjustments for inflation.
All of the financials recently published are inflation adjusted.
As such, prices of stocks will most likely continue their rallies in the equities market in the short to medium term.
Last year, there was a blend of good and bad stock market experiences.
It started breaking record highs, like now, to breaking lows, at record speed to breaking highs again.
That was a quick boom, crash, and boom again cycle Zimbabwe’s capital market has ever received, analysts told Business Times.
Government closed the stock market on June 26 last year to pave way for investigations into the suspected trading of foreign currency on the parallel market linked to movements in the Old Mutual Implied Exchange Rate.
It resumed trading on August 3, 2020, minus three counters namely Old Mutual, PPC and SeedCo International. PPC and Old Mutual remain suspended while SeedCo International is now trading on the Victoria Falls Stock Exchange, which was launched in October.
When trading on the ZSE resumed in August, investors became too cautious, perhaps bracing for an economic slowdown.
Consequently, the market experienced some emotional selling with investors panicking.
However, there have been a lot of buy-backs by companies, meaning all extra cash is now being deployed in the market.
A lot of liquidity has also been poured on the market, resulting in a bull-run on the market.
And the bulls keep charging.
