ZSE in 2021: A bird’s eye view

The Zimbabwe Stock Exchange (ZSE) closed the year, 2021, as the best performing bourse in the region, taking the record to two consecutive years. The market went up by 311% in nominal terms, ahead of annual inflation which capped the year at 60,7%.

In 2020, the bourse rose by a whooping 1 046%, while annual inflation closed at 577,21%. Gains were largely skewed towards penny stocks which surged by 3 280% while market heavies rose by 308%, weighing down the weighted average gain.

On a sectoral review, the ICT stocks emerged the best performers with a return of 645% while the financials sector was the worst performing at 48% as confidence in the country’s banking systems continues to plummet amid a currency crisis.

Stocks on the ZSE have largely been driven by inflation and the exchange rate, racing value against the two monsters which has increased investor-appetite of hedging in stocks as the most viable asset class.

In 2020, the overall market index gained 1 046%, performing ahead of consumer price index which was up 577% while the trading currency, the Zimbabwean dollar (ZW$) depreciated against the greenback by -433% and -374% on the parallel and the formal currency market respectively. This shows a more than single-fold gap between currency value loss on the currency market and value gained on the ZSE.

In 2021, the all-share index rose by 311%, ahead of consumer price inflation which escalated by 60,7%, while the ZW$ lost value on the parallel market and the interbank market by -67% and -33% in that order. This renders the ZSE the most profitable asset class relatively.

A total of about ZW$72,6 billion exchanged hands on ZSE in 2021, down from ZW$17,1 billion in 2020. The average formal exchange rates for both years were 54,19 for 2020 and 88,77 for 2021, which translates the aggregates to US$315 million for 2020 and US$818 million in 2021, a more than one-fold increase in appetite for stocks and liquidity on the bourse.

In volumes terms, an aggregate of 7,9 billion shares exchanged hands in 2021, up from 3,7 billion traded in 2020. The rise in appetite for stocks has been exacerbated by the exceptional performance of ZSE in the region as well as invalidation of other investment classes amid the global pandemic of Covid-19.

However, foreign outflows continued to dominate foreign trades in the year under review, with outflows totalling ZW$12,5 billion against a ZW$2.8 billion sum of inflows.

Beginning in the second quarter of 2021, the ZSE has hypothetically followed a trend of buy of sell in the short run, recording a high demand in the first half of each month accompanied with a rapid escalation of prices which would, however, be followed with a spree of a downward spiral in the last half of each respective month stimulated by profit taking as short-term investors (traders) take out gains made in the first two weeks.

The trajectory has since stretched into 2022 as January has already trimmed the 13% gains made in the first two weeks of 2022 to a mere 5% gain.

Meanwhile, the US$ denominated bourse, Victoria Falls Stock Exchange (VFEX), closed the year of 2021 boasting of four listings, with mining companies, Bindura Nickel Corporation and Caledonia Mining Company, being the latest two companies to list after Seed Co and Padenga.

The bourse has recorded a gradual growth in liquidity as the central bank improves efforts of availing the greenback to the general public.

Padenga has emerged the most liquid company on the bourse, posing as the most active stock on the “new” bourse.

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