Mugabe’s woes wipe out $5b from Zimbabwe bourse

Stocks hit an 8-week low, bringing the industrial index’s fall since coup to 27%

Investors dumped Zimbabwean stocks every day since the military seized power on optimism that 93-year-old President Robert Mugabe will be forced to step down.

The stocks, which are denominated in US dollars and were used to hedge against rising inflation, fell 10 per cent on Monday to an eightweek low of 387.38, bringing the Zimbabwe Stock Exchange Industrial Index’s retreat since the army’s takeover on the morning of November 15 to 27 per cent.

The bourse’s market capitalisation has plunged $4.8 billion in that period to $11.1 billion, according to data compiled by Bloomberg and the Zimbabwe Stock Exchange. Zimbabwe’s stocks soared this year after the government printed a new form of money — called bond notes — to deal with a cash shortage, stoking concerns over price growth in a nation that saw inflation jump into the billions of per cent about a decade ago.

While the southern African nation has mostly used the dollar since scrapping its own worthless currency in 2009, greenbacks have become scarce as Zimbabwe’s balance of payments position has worsened.

Investors pointed to the so-called Old Mutual gap as a sign of how unrealistic Zimbabwean valuations had become. While the insurer’s shares trade at the dollar-equivalent of about $2.52 in London and Johannesburg, they rose to $14.30 by November 14 in Harare, Zimbabwe’s capital. They have since fallen to $9.25.