Falling exchange rate trigger ZSE bull run
The Zimbabwe Stock Exchange (ZSE) witnessed significant gains since Tuesday this week amid indications the rally could have been a result of investors seeking to hedge against depreciation of the Zimbabwe Gold (ZiG). ZiG, backed by gold and other minerals, is experiencing its longest run of losses against the dollar since it started trading on April 8.
The ZiG currency which opened the month of September trading at ZiG13,86 to the greenback, has lost significant value and is now trading at ZiG13,9492 per US$1.
The premium between the interbank market and the parallel market has also been growing as the rate has plummeted to between 24 and 26 per US dollar. In Tuesday’s trading session, the All-Share index surged 6,65 percent while the Top 10 Index gained 8,86 percent amid high demand for blue-chip counters.
The day’s rally was largely driven by the top five risers, with brickmaker Willdale leading the risers with 15,74 percent, followed by banking group’s FBC and NMB, that gained 15 percent and 14,98 percent, respectively.
Sugar company Star Africa Corporation and stationery and battery maker ART Corporation completed Tuesday’s top risers, gaining 14,55 percent and 13,15 percent, respectively.
In Wednesday’s session, the mainstream All-Share Index surged another 6,50 percent while the Top 10 Index gained 8,49 percent, with gains recorded across all sectors. A total of 5,86 million shares worth ZiG25,55 million exchanged hands in 116 trades, a significant increase from Tuesday’s ZiG6,654 million on a total of 3,25 million shares and 94 trades.
The top five risers for the day were led by British American Tobacco (BAT), First Mutual Holdings (FML), and Seed Co., which all gained 15 percent. ART Corporation and First Mutual Properties (FMP) completed the top five risers list after gaining 14,71 percent and 14,43 percent, respectively.
Further gains were recorded on Thursday as the market’s daily turnover surged to ZiG111,7 million bolstered by significant volumes in EcoCash. The ZSE All Share Index rose by 2,48 percent to close at 236,20 while the ZSE Top 10 Index firmed up 2,27 percent. BAT and SeedCo led the risers, up 15 percent each.
FML, ZHL and CBZ advanced 14,98 percent, 14,80 percent and 14,04 percent.
Financial economist Malone Gwadu said the recent monetary policy was lukewarm and didn’t hit address issues that lead to ZiG depreciation.
“So naturally people will hedge,” he said. The collapse of the ZiG has led to a sharp rise in the prices of goods and services, with retailers responding by replacing price tags in ZiG with those in US dollars.
The situation persists despite the Reserve Bank of Zimbabwe (RBZ) injecting US$190 million into the forex markets since the inception of ZiG.
In the MPS, the central bank implemented additional measures aimed at enhancing transparency and efficiency in foreign exchange transactions to support ZiG.
Meanwhile, governor Dr John Mushayavanhu told Bloomberg that the RBZ and the financial intelligence unit will “double their efforts toward enforcement of the country’s foreign exchange and currency regulations,” The central bank will also closely monitor developments on the parallel market “with a view to mitigate against extreme exchange rate distortions,” he said.-ebsinessweekl
