‘Bad money starts fleeing ZSE as bubble got pricked’
Weakness persisted on the equities market with nearly $800 billion lost on the Zimbabwe Stock Exchange (ZSE) in a fortnight on low demand as investors maintain a wait and see approach that analysists say symbolises a classic case of “bad money” fleeing the bourse.
This follows a raft of measures recently introduced targeting speculative activities and also to support currency stability.
A fortnight ago, Government announced measures such as suspension of lending by banks – although it was later reversed – in an effort to control money supply.
On the equities market, Government reviewed capital gains tax from a flat rate of 20 percent to 40 percent for shares held for a period less than 270 days.
Market watchers have hinted this would reduce participation especially for retail investors.
“On this backdrop, we are likely going to experience reduced activity on the Zimbabwe Stock Exchange.
“We anticipate net selling on the bourse as there are high chances speculators and arbitragers will start exiting the market. We are of the view investors will return to valuation fundamentals as ‘bad money’ leaves the market,” said stockbrokers IH Securities.
In the past two weeks, the market has seen declines led by heavy caps which resulted in investors incurring over $742 billion in cumulative losses. Total market value declined to $2,382 trillion from $3,82 trillion a fortnight ago.
In the past two weeks, the market’s heavy caps, the ZSE Top 10 Index has retreated by 25 percent to 13 364 points from 18 044 points as weakness persisted.
By close of Monday trades, the index had registered pockets of gains with a marginal 0,04 percent increase recorded over previous session.
Property firm, Mashonaland Holdings highlighted Monday’s trading session as 20,29 million shares worth $81,17 million exchanged hands. The shares represented 92,76 percent of the total volumes that traded and 29,66 percent of the value outturn.
Other notable value drivers of the day were Econet, Delta and Innscor with a combined contribution of 50,17 percent to the aggregate. Volume of shares traded ballooned 1415,52percent to 21,88 million as turnover jumped 77,04 percent to $274,58 million.
On the downside, banking group NMB was the major casualty of the day with a 14,93 percent dip to end pegged at $29,35.
TSL dropped 13,24 percent to settle at $85,02 while NTS trimmed 12,2 percent to $12.
Property concern FMP came off 12,18 percent to $6,13 as Zimplow capped the top five shakers on a 8,49 percent retreat to $23,42.
Market watchers are however of the view it’s not all doom and gloom with Government’s goal to restore confidence, stabilize and unify exchange rate as well as rein in inflation.
“While these measures are still in place, we believe the intended objectives could be achieved,” said IH.
Inflation, however, might keep increasing given the country is still susceptible to global inflation as power and fuel prices remain elevated while economic growth prospects are also dependent on currency stability, moderate inflation and policy stability.
Year to date the parallel rate has deteriorated by 88 percent to US$1:$405-eBusiness Weekly
