The Zim­babwe ru­ins

Zim stock ex­change falls 40% in US dol­lar terms

Finweek English Edition - - Economic trends & analysis - GARTH THE­UNIS­SEN

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.

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