ZSE hits 12-month low on temporary stability
THE Zimbabwe Stock Exchange (ZSE) had its worst outturn in 12 months, as gains for the month of March vanished compared to prior months. Stats show that the overall market gained only 8,96% to close at 4888,7. Comparatively, in the months of January and February the ZSE All-Share Index mounted 36,5% and 15,3% respectively. Nevertheless, even these euphoric heights are thwarted by most of the monthly gains achieved in 2020.
As an illustration, for the month of May last year the local bourse surged by 141% before the government moved to suspend trading quoting widespread speculation. In December the market surged 65,23% steering the bourse’s yearly gains to over 1 000%.
The slowdown in advances witnessed in the month of March 2021 is however not a negative indicator per se. Zimbabwe suffered from hyperinflation in 2019 and for the greater part of 2020. This saw investors taking cover on the local bourse in a bid to hedge against the inflation.
Inflation reached a high of 830% before moderating in the final quarter of 2020. Hyperinflation hit Zimbabwe over a decade ago and any resurgence thereof brings shivers to the average Zimbabwean investor
The surge in average prices was largely due to a weakening exchange rate, which devalued following a decision to liberalise the economy. The exchange rate which began 2020 at 1:20, closed the year at 1:82, a depreciation of over 70%.
Gains in the month under review were mainly skewed towards market heavies, although small caps maintained their gaining trajectory which is, however, still too marginal to effect a change on the overall bourse.
Furthermore, Zeco traded for the first time in six years, scaling up 50% to ZW$0,03 cents. The counter traded a total of 2,5 million shares worth ZW$758 (US$8,98).
Other notable risers were African Sun, up 24,4% to ZW$2,36 (US0,027 cents) and Padenga up 18,53% to ZW$29,63 (US0,35 cents). Delta, which recently concluded a deal to take up Mutare Bottling Company, was up 14,11% to ZW$46,22 (US0,54 cents). Bindura was the period’s biggest loser down 18% to ZW$4,38 (US0,051 cents).
The trend has been sustained in the month of April 2021 as ZSE counters took a knock in the week’s inaugural session in the aftermath of the Easter holidays, the longest public holiday in a calendar year, as demand weakened further. The market has been vacillating over the latest three sessions.
The ZSE All Share Index shed -0,77% to close at a one-week low of 4454.78 points, which is a negative start of the month.
A sneak peek into the initial April outturn indicated subdued activity driven by heavy cap softness mainly Econet, Padenga and Cassava SmarTech.
Comparatively, global stock markets rose on Tuesday as another batch of strong US economic data bolstered the global outlook, while currency and bond markets paused for breath after a month of rapid gains in the dollar and in US Treasury yields.
The slow-down experienced thus far is indicative of the tamed inflation in recent months; which came in at 240,55%, flaking off 81,04% from February’s 321,59% figure while month-on-month inflation came in at 2,26%, shedding 1,19% from the 3,45% recorded in February to record its lowest outturn since October 2018.
Propping inflation is a stabilising exchange rate between the local currency and harder currencies as well as restrained reserve money growth.
However, fuel prices have surged in recent months threatening the cost of doing business and the cost of living with the latest bout having come in this month. Fuel prices have mounted 11% and 7% from US$1,21 and US$1,23 set on January 5, 2021 for petrol and diesel respectively, whilst in local currency terms, it has increased by 14% and 11% from ZW$99,35 (US$1,17 at official rate) and ZW$100,91 (US$1,19) in January for petrol and diesel respectively.