PHILLIMON MHLANGA
Stocks at the Zimbabwe Stock Exchange (ZSE) slumped to new lows after bears wiped out ZWL$1.35 trillion in investors’ wealth in the past seven days, closing yesterday at ZWL$10.03 trillion as liquidity remained thin, crushing investors’ confidence.
The market cap was ZWL$11.38 trillion on Wednesday last week. The stock exchange peaked on June 19 at ZWL$15.3 trillion, its highest level ever.
But yesterday, the value of stocks fell to ZWL$10.03 trillion. Multiple analysts have attributed the plunge to the liquidity crisis ravaging the economy and the forthcoming harmonised elections, scheduled for August 23, 2023.
“There is only one trigger to the narrative, that is the liquidity crisis. Almost daily, the ZSE releases news that is unfavourable,” an investment analyst, who preferred anonymity told Business Times. Gold coins and the wholesale forex auction system are two methods the government has used to mop up excess liquidity from the market.
ZSE’s All Share Index dropped 84.30 points to close at 128 944.39 points.
Trading in the red were Ecocash Holdings Limited, which lost ZWL$15.38 to close at ZWL$139.62, and Hippo Valley Estates Limited, which lost ZWL$38.33 to close at ZWL$2 261.67.
Zimre Holdings was ZWL$10 weaker at ZWL$75.00. Zimbabwe’s biggest brewer Delta Corporation also decreased by ZWL$6.32 to end at ZWL$2 024.82 while Masimba Holdings Limited lost ZWL$5.98 to close at ZWL$904.43.
The movers included TSL Limited which added ZWL$70 to close at ZWL$610.00.First Mutual Properties Limited increased ZWL$13.99 up at ZWL$107.75 while Mashonaland Holdings was ZWL$9.53 stronger at ZWL$111.79.
Econet Wireless Zimbabwe, the largest mobile network operator in the country, increased by ZWL$4.21 to close at ZWL$515.03, and Meikles Limited increased by ZWL$3.09 to ZWL$753.08 as well.
However, there are growing concerns that the upcoming elections will lead to an increase in the money supply due to an increase in election related government spending.
A loosening of the money supply controls could cause the economy to become more unstable by raising inflationary pressures and exchange rate volatility.
The performance of the ZSE, analysts said, has largely lagged behind inflation and exchange rate trends as liquidity constraints restrict share price performance.
This however creates an opportunity for investors to accumulate quality stocks at discounted prices as the bourse houses a number of fundamentally sound investment options.
Analysts expect investors to remain cautious moving into elections and the second half of the year, which may increase selling pressure.
