Local currency shortages and USD demand stifle stock markets
The local market is facing liquidity challenges which have resulted in lower buying momentum as Year-To-Date trading values show that 71 percent of the total turnover is in Econet (47 percent) and Delta (24 percent).
Securities and research firm, Platinum Securities, commented on the issue saying; “We have also observed a few sellers willing to get out of positions at the prevailing market prices.”
The rise in prices being observed have been driven by the few buyers in the market, but not to the level the market expects given the macroeconomic fundamentals in the economy, which are pointing to higher inflationary pressures.
“During the coming week, we expect the blue chips and the medium cap counters to dominate trading volumes,” Platinum Securities said.
However, on the VFEX, trading activity has remained generally slow due to low levels of investor participation on the VFEX arising from competing demand from numerous USD denominated assets and low foreign investor participation.
In the previous week ending January 12, the ZSE All Share Index recorded 20 risers led by Edgars (51,26 percent) and eight fallers led by Dairibord (-11,35 percent) resulting in the index gaining by 5,18 percent from 253,617.96 points in the prior week to 266,752.43 points.
Market turnover for the week was $17,5 billion up from $4 billion in the prior week led by Econet and Delta which contributed $9,32 billion and $3,13 billion respectively.
On the ETFs, three out of the five listed counters closed in the red with Cass Saddle Agric leading the fallers after losing by 13,93 percent to $556 cents. Datvest MCS, the sole ETF gainer was up by 1,71 percent to close at $11.82.
The VFEX All-Share Index was down for another successive week since it was rebased to 100 points on January 1, 2024. The Index lost 2,52 percent from 98.48 points to 96.00 points after significant losses were recorded in five out of the seven counters that traded during the period under review.
Innscor one of the risers was up by 2,29 percent to US42.96 cents. SeedCo International, the biggest losing counter of the week was down by 22,52 percent to US23.98 cents compared US30.95 cents in the prior week.
There was a significant movement in the USD/$ official exchange rate on the auction market, which resulted in a 31,46 percent USD appreciation against the $ from $6,447.0154 to $8,501.2833.
This development is a sign of looming inflationary pressures in local currency terms as business operators have adopted a pricing model where prices are indexed to the USD.-ebusinessweekly
