ZIMBABWE’S stock exchanges experienced significant market capitalisation losses last week owing to uncertainty over government’s proposed “structured currency”, liquidity crisis and a decline in trading volumes, a new report has shown.
In its report for the week ending February 17, 2024, Zimbabwe Stock Exchange (ZSE) Technician, an organisation analysing the performance of the country’s exchanges, said ZSE lost just over 10%, and Victoria Falls Stock Exchange (VFEX) lost 3%.
“This week was bearish; there were losers than gainers in both exchanges resulting in significant losses. If we combine both exchanges, they lost approximately 10,2%. The poor performance can be attributed to many factors including liquidity crisis, uncertainty over structured currency (and) decline in trading volumes,” ZSE Technician said.
This comes as the Finance, Economic Development and Investment Promotion minister Mthuli Ncube announced last week plans to create a “structured currency” whereby the currency will be linked to a commodity and the creation of a currency board to monitor it.
No further information has been availed since the announcement, hence the uncertainty.
The ZSE market cap declined by 11% to ZWL$38,25 trillion. In United States dollar terms, the bourse lost 13% to US$2,185 billion using a parallel rate of ZWL$17 500. The VEFX market cap declined by 3% to US$1,162 billion.
In the period under review, last week’s volumes added approximately 9,38% to the total volumes of the year to reach US$13,65 million total traded value on ZSE.
For the week under review, total traded value on ZSE stood at US$1,17 million, a 60,6% change in weekly volume.
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The report shows that 67% of last week’s volumes was channelled towards three counters namely Dairibord Zimbabwe, Delta Corporation and Zimre Holdings Limited (ZHL).
“The reasons behind this volume structure can be explained by Mutapa Investment acquisition in ZHL, Delta reversal resulting in panic selling and profit collection,” it said.
VFEX volume increased by 99% from last week, and added 37,6% to the total traded volume to reach US$5,3 million. Simbisa remains the most traded stock since the beginning of 2024 with a market dominance of about 32%.
Africa Sun dominated 76% of the weekly volumes.
The report further notes that the continued depreciation of the local currency has negatively impacted the exchange rate premium, which has crashed the markets since 2021.
Exchange rate premium determines the direction of markets in Zimbabwe. It represents many economic indicators that affect capital markets.
According to the report, the downtrend in exchange premium in its monthly close chart declined to 60%, from 86% at the end of December 2023. By February 16, it was at 38% and both ZSE and VFEX were in a downtrend.
The ZSE Technician said CBZ maintained its market cap over a week but Delta and Econet were significantly losing. Econet is now only 64% of CBZ Holdings and 39% of Delta. Small and medium cap improved 35% over a month and the top 3 reduced their dominance by 23%.
At VFEX, WestProp maintained its US$300 million market valuation. Innscor and Simbisa lost about 5% and 10%, respectively.
