ZSE retreats further
RYAN CHIGOCHE
The Zimbabwe Stock Exchange (ZSE) has suffered another bruising two weeks amid fears of regulatory crackdown compounded by the emergence of gold coins in the market, a move which has seen investors switching to the alternative asset class.
The stock market shed more than ZWL$220bn in a fortnight from ZWL$2.07 trillion at the beginning of August to ZWL$1.846 trillion on Tuesday this week.
The worries around recent regulation and bond notes has resulted in investors turning their back on ZSE, once a favoured and go-to-destination for companies seeking cheap funding, pulling out billions of dollars from the local bourse.
Consequently, the All-Share index lost 271.27 points in the period under review to close at 14 821.96 points on Tuesday.
The Top 10 index shed 1.76% to 8 990.45 points from 9 151.60 points.
The penny stocks or small caps, however, gained 3.35% to 519 211.55 points on Tuesday this week from 502 399.19 points.
The shakers, who were trading in the negative were TSL Limited, which retreated ZWL$12.75 to close at ZWL$72.25 while Zimbabwe’s largest mobile telecommunications operator, Econet Wireless Zimbabwe shed ZWL$7.65 to close at ZWL$146.47.
Tanganda Tea and Meikles lost ZWL$5.69 and ZWL$5.17 to close at ZWL$132.31 and ZWL$99.82 respectively.
Simbisa Brands shed ZWL$4.82 to end at ZWL$175.99.
On the flip side, the country’s largest brewer, Delta Beverages, was among the movers, gaining ZWL$1.47 to close at ZWL$220.09 while Innscor Africa inched ZWL$0.13 to ZWL$265.30.
A stock market is often considered a predictor of future economic health.
Research and securities firm, Morgan and Co, believes the sea of red seen on the local bourse over the past few weeks was caused largely to the liquidity constraints following the introduction of gold coins also known as Mosi-Oa-Tunya in the market and government interventions to curb speculative activities, among other crackdowns by the administration.
“The gold coin has triggered a sell off on ZSE as institutional investors are switching to an alternative asset class that has prescribed asset status. As a result the stock market largely derated on weak demand because of the tight liquidity in the market,’’ reads part of the Morgan & Co report.
Last month the Reserve Bank of Zimbabwe (RBZ) released 2 000 gold coins called Mosi-oa-tunya onto the market.
The gold coins attracted a huge demand as they are seen as a store of value.
This has left the ZSE in limbo.
The RBZ governor, John Mangudya said the central bank will introduce smaller denominations in November this year to ensure the ‘rest of the public benefits’.
Morgan & Co said the stock market prices have continued to decline in real terms with the market looking increasingly cheap.
The sell off on the ZSE, Morgan & Co has also resulted in the undervaluation of blue chip counters like Delta Corporation, Innscor Africa Holdings, Hippo Valley and Meikles.
Morgan & Co said these new measures introduced by the government had a negative impact on trading volumes on the ZSE given the limited access to liquidity.
A senior analyst with Morgan and Co Tafara Matutu said: “On a fundamental perspective it looks like it’s [ZSE] going to be chopping ground going forward from an overall perspective looking at severe withdrawal of liquidity on the stock market that has led to prices being depressed on major counters”
