FBC Securities says market activity on the main bourse has remained depressed, hampered by tight liquidity and confidence issues.
The performance of the Zimbabwe Stock Exchange (ZSE) has largely been mixed this year due to the depreciation of the local currency.
For example, during the height of the local currency’s worst volatile period over the months of May and June, the ZSE’s market capitalisation reached a peak of ZWL$14,04 trillion on June 27. However, by July 31, the ZSE’s market capitalisation had lost about ZWL$4,87 trillion.
Since then, as of Friday, the ZSE’s market capitalisation has gained just over ZWL$1 trillion from its July total.
“Market activity has remained depressed in the current year, hampered by tight liquidity and confidence issues that continue to affect investor sentiment,” FBC Securities said, in its third quarter market report.
“While market capitalisation has advanced 383% year-to-date in ZWL$ terms, in US$ terms, market cap is down 37% between December 2022 and September 2023. In its pensions industry report for the half year to 30 June 2023, Ipec [Insurance and Pensions Commission] reported a decline in quoted equity investments to 26% from 40% of total asset composition for the industry.
“Investment property has been the dominant asset class, constituting 52% of total assets compared to 38% recorded in the comparable period last year, indicating the industry’s investment preference for the asset class,” FBC Securities said.
The stock market’s performance was likely to continue to be impacted by local liquidity conditions and value preservation concerns given existing currency dynamics, it further noted.
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“We expect appetite for alternative investments to continue to grow as investors continually assess local economic conditions.”
According to financial services firm IH Securities, the month of September saw increased activity on the ZSE with a 122,01% growth in average daily value traded on the bourse to US$0,62 million.
However, this was due to a structured trade in First Mutual shares worth ZWL$44,49 billion acquired by CBZ Holdings from the National Social Security Authority.
IH Securities said the trade, which constituted 227 million of First Mutual’s issued shares, saw total volumes traded growing 284% to 344,29 million for the month.
“Market cap fell 0,45% month-on-month in nominal terms to ZWL$9,86 trillion. However, due to currency dynamics, the exchange deflated 11,83% to US$1,41 billion in real terms. The All-share index saw a growth of 1,20% versus a 3,74% decline in the top 10 index in the same period. At the current market cap, the ZSE is still trading at a discount to the long-term average of US$4 billion,” IH Securities said.
“As such, the ZSE offers upside, trading at a deep discount to fair value despite fundamental growth in businesses over the past 3 years and themes of increasing corporate transactions. While fundamentals speak to a bullish stock market in 2023, the ZSE has become a reflection of ZWL$ money supply. We are of the view that we will continue to see strong correlation between money supply and ZSE stock market performance.”
GetBucks made a voluntarily delisting from ZSE last month, owing to the ZSE’s mixed performance.
