Last quarter surge lifts Zimbabwe equities, but challenges remain

The Zimbabwe Stock Exchange (ZSE) saw a surge in the last quarter of 2016 as investors sought cover for possible loss of value under the bond notes currency, but the rally failed to mask deficiencies in the southern African country’s economy which are set to spill over into 2017.

Bond notes, a parallel currency, was introduced in the last week of November to trade at par with the United States dollar. The government resorted to printing the notes in a bid to ease the shortage of US dollar notes in the economy, which it blames on smuggling of the reserve currency as well as a gaping current account.

Prior to October, the local bourse was sluggish, with the industrial index easing 15 percent on an annualised basis. The resource index was in worse shape, and was down 44.24 percent at June 30 before a recovery of sorts in the third quarter.

But local asset managers, fearing loss of value after the introduction of bond notes, sought to shield their investments in equities and properties, boosting the bourse performance.

The industrial index closed the year at 144.53 points, a 26.28 percent increase on the previous year while the mining index advanced 146.88 percent year-on-year to 58.51 points.

Total turnover decreased by 15.18 percent from $228.62 million in 2015 to $193.91 million in 2016, its lowest since 2009 when Zimbabwe dollarised.

The average monthly turnover also declined from $19 million in 2015 to $16 million in 2016, while volume of shares traded were down 32.47 percent to 1.5 billion shares. The month of December recorded the highest turnover in the year to the tune of $25.997 million.

August, on the other hand, recorded the least value of trades amounting to $7.076 million in the year under review.

Market capitalisation rose by 30.41 percent year-on-year to $4.008 billion as at 30 December 2016, attributable to gains recorded by most heavy weights.

The largest company by market share, Delta advanced 25.53 percent to close at 88.5 cents. The telecommunications giant, Econet, also added 42 percent to settle at 30 cents. Padenga, Old Mutual and Innscor advanced 107 percent, 71.68 percent and 60.21 percent to close at 16 cents, 349.21 cents and 48 cents in that order.

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