THE market capitalisation of the Zimbabwe Stock Exchange (ZSE) decreased by 3,05% in April compared to the pre-Zimbabwe Gold (ZiG) era, due to changes in the monetary regime.
In the month under review, the government introduced ZiG, which replaced the Zimbabwe dollar, triggering some instability in the stock market.
In its monthly report for April, Fincent Securities noted that the ZSE’s All Share Index weakened by -1,18% over the month, with major losses in the Top 10, which waned by -3,08%.
Losses in the Top 15 were -1,94%, while the medium cap index advanced 3,89%.
The small cap index remained the same at 100 points.
“Values on the exchanges were mostly weighted on Delta, Econet and Hippo for ZSE as well as Simbisa and Innscor for VFEX (Victoria Falls Stock Exchange).
The ZSE slumped at month’s end as the market cap fell by -3,05%, compared to pre-ZiG era, on the VFEX ,the bourse gained 1% in market cap,” the report reads in part.
Ariston led the gainers, adding 81,50% value with shares worth ZiG10 877 exchanging hands over the month.
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The bourse recorded a monthly turnover of ZiG16,7 million from April 8 to April 30.
VFEX recorded a monthly turnover of US$2,5 million compared to US$3,7 million recorded in March.
Seed Co was the biggest loser for the month, letting go -39,83% of its value, followed by Econet at -22,15%, Meikles (-15,01%), Dairibord (-14,86%) and GB Holdings (-11,03%).
“Currently, the exchange rate is fairly stable, and should this stabilisation persist, we anticipate repricing of prices based on fundamentals. We forecast a steady activity on the local bourse in May emanating from improved comprehension of ZiG currency,” Fincent noted.
The researchers said the ZSE has experienced a freefall since its reset.
“The entire market capitalisation of the bourse closed the month at US$2 billion. However, during periods of stabilisation, the bourse reached a peak market cap of US$5,3 billion in 2013,” the report states.
“Despite some counters moving from the ZSE to VFEX, our estimation suggests that a fair value for the bourse should be at least US$3 billion. Long-term investors may find buying opportunities, especially as the ZiG strengthens.
“We anticipate that provided the exchange rate remains stable, activities on the local bourse will increasingly be driven by fundamentals, leading to repricing of many counters and potential benefits for investors.
“In summary, these adjustments reflect the changing currency landscape in Zimbabwe and its impact on the stock market.”
ZSE Technician, an organisation analysing the performance of ZSE, said the monetary policy dumped the local currency stock market from its monthly peak on March 15.
It said all first quarter United States dollar gains, which reached 90% in February, were eroded because of a liquidity crunch emanating from the currency conversion process, which technically stalled the market.
“Using a PMR (parallel market rate) of ZWL$11 000 at the start of the year, ZSE market cap was about US$1,47 billion. It increased to US$2,8 billion before a micro downtrend started,” the Fincent Securities said in the report.
“A sharp fall happened after the MPS (monetary policy statement) and brought the market cap under US$1,47 billion on 22 April if we calculate using a rate of ZiG20,” the organisation said.
“This makes ZSE smaller than the Lusaka Stock Exchange, which is approximately US$1,7 billion and 0,15% of the US$1 trillion Johannesburg Stock Exchange.
“ZSE market cap is back below its initial position, which means there are losses year to date.
“It spent almost four months in profit before it started to trend in losses for three days (22 - 24 April) due to parallel rate movements.
“Recent economic developments worsened liquidity challenges on ZSE, pushing it further down by more than 50%. VFEX was moving in the opposite direction by slightly improving liquidity, which could have been caused by the new listing, Edgars.
“Volatility means high risk and high profit margins. VFEX is less volatile than ZSE since it’s not affected by some of the economic factors like exchange rates,” the report reads.
On the contrary, ZSE volatility significantly increased as evidenced by its highest standard deviation of the year.
The ZSE movements are ranging in approximately 20% of the market cap against the VFEX’s range of less than 2%.
