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Zimbabwe Stock Exchange in headlong plunge

By Nqobile Bhebhe
Posted on Thursday, 9 April 2015 13:44

Market capitalisation for the quarter ending March 31 dropped 10 % to $4,1 billion compared to the previous year.

The political dust is yet to settle as evidenced by intensifying bickering in the ruling party

Market watchers attribute the drop to weak foreign participation and liquidity constraints on the domestic market.

At the beginning of the year market capitalisation was at $4, 36 billion.

Latest statistics from the bourse indicate that a total of 586 093 096 shares exchanged hands in the quarter down from 687 208 341 during the same period last year.

In its outlook for 2015, brokerage firm MMC Capital projected the equities market to remain under pressure this year on the back of poor operating fundamentals in Zimbabwe.

“Escalating economic headwinds continue to hamper sustainable economic recovery, with liquidity constraints, faltering industry capacity utilisation and waning government revenue persisting to be the major impediments,” MMC.

“The political dust is yet to settle as evidenced by intensifying bickering in the ruling party, Zanu PF, hence putting a damper on the upside potential of the local bourse,” MMC said.

Financial results of listed companies show the economy is struggling with a majority of firms shutting down.

“The poor performance is on the back of poor operating fundamentals in the economy as reflected by company closures, retrenchment, scaling down of operations, negative inflation and limited access to affordable long term capital,” said MMC Capital’s research analyst Kudzi Samudzi.

“These challenges have in turn been reflected in poor results that have been released by most quoted companies with the exception of a few that have a foreign flair.”

Zimbabwe’s economy has been on a downturn for more than a decade due to low growth and high unemployment.

The economy entered a tailspin after the launch of controversial land reforms 14 years ago.

By 2008, inflation had officially peaked at 231 million percent before the government stopped counting.

But last year was a positive period for Zimbabwe’s equities market, and continued positive performance of the country’s stock exchange since 2009 added to the strong figures.

Foreign interest played a noteworthy role in the bourse performance and interest from foreign players continues to grow despite Zimbabwe’s indigenisation laws.

Recently, government has toned down its rhetoric on the indigenisation and empowerment regulations compelling foreign firms to dispose of at least 51 % stakes to locals in a bid to whet the appetite of investors.

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