The Zimbabwe ruins
Zim stock exchange falls 40% in US dollar terms
BELIEVE IT OR NOT, the Zimbabwean Stock Exchange (ZSE) is pumping. In the two-week period between 5 March and 19 March 2007 the bourse’s benchmark index went from just over 1,5m index points to more than 4m index points – an increase of 167%.
However, in US dollar terms the story is an unmitigated disaster. Just one month ago the total market capitalisation of the ZSE was roughly US$3bn. But thanks to hyperinflation and a freefalling currency it’s now down to just $1,8bn. That’s a 40% loss of hard currency value in just one month.
Interestingly, that hasn’t stopped foreign investors from piling into Zimbabwean equities. “The ZSE is the cheapest stock market in the world right now and we believe that once the economy starts coming back the ZSE is going to go up ten times in US dollar terms,” says Peter Sandys-Smith, a stockbroker at Mast Stockbrokers in Harare.
Apparently the preferred investment method is to buy JSE-listed Old Mutual shares that are then converted to ZSE-listed Old Mutual stock. Sandys-Smith says that these are then “swapped” in the market for other Zimbabwean blue chips, as nobody wants to take even a temporary position on Zimbabwean dollars. Similarly, when investors want to take their profits and run, they simply reverse the process.