Renewed interest in Zim agric, mining sectors drive market capitalisation

THE year 2022 was challenging for investors due to several factors such as rising inflation, interest rate hikes and geopolitical tension, leading to market volatility and uncertainty across different stock markets.

From a global economic perspective, the conflict in Ukraine led to price hikes, which added to inflation concerns at the beginning of the year.

In response, most central banks were on their toes trying to contain the rising inflation through interest rate hikes.

In the period under review, growth was slowing and economies like Europe were at risk of being pushed to the brink of recession due to their proximity to the conflict between Russia and Ukraine, but more precisely due to the region’s great dependency on Russia’s energy resources.

In Zimbabwe, the economic situation was challenging due to a combination of factors such as inflation, exchange rate instability and incessant power cuts among others.

However, the country has made some tremendous progress in stabilising the economy in recent months.

In terms of the capital markets’ performance, the Zimbabwe Stock Exchange (ZSE) has seen growth in activity in recent months.

The market capitalisation of the ZSE grew by 55% over the past year largely driven by renewed interest in the country’s agriculture and mining sectors.

However, the ZSE remains relatively small and illiquid compared to regional peers and, as such, it can be highly volatile.

The number of companies listing on the Victoria Falls Stock Exchange (VFEX) continues to grow as the year 2022 saw the migration of two companies, National Foods and Simbisa, from ZSE to VFEX.

Other additional instruments, like depository receipts by Nedbank Group Limited and the Karo bond, also listed on the bourse in the year under review.

We think more is yet to come and this will vastly improve activity and the exchange’s liquidity.

Despite a challenging economic situation in Zimbabwe, we remain resolutely optimistic.

We expect the country to continue making strides towards stabilising the economy and attracting investment.

As such, we believe that the Zimbabwean capital markets offer attractive opportunities for investors with long term investment horizons and to those willing to take high risk in exchange for potentially higher returns.

We strongly recommend that investors conduct thorough research before making any investment decisions.

Akribos remains dedicated to guiding you through this process and helping you diversify investments in order to mitigate risk. Akribos