Zimbabwe Stock Exchange – when will the music stop?

When the music stops, in terms of liquidity, things will be complicated.

But as long as the music is playing, you’ve got to get up and dance.

We’re still dancing, said Chuck Prince, former Citigroup chief executive and chairman referring to credit bubble before the 2008 financial crisis.

No better words can sum up the general mood of the current Zimbabwe stock market than the words of Prince.

Well, Chuck Prince stopped dancing not many months after making that statement to FT – he was forced to retire.

But that was not before he was warned that timing the end of the song was a really hard thing to do.

Citi suffered huge losses from risky assets it held.

Zimbabwe’s stock market has been on a recording run ever since the government engineered bond notes.

None of the local investors may be forced out when the music stops but they will be bruised when the equity markets self-correct.

Notice, Mr Prince did not say “if” rather “when” – an acknowledgement that the music will stop.

In the same way, money managers and investors alike marvel at how stocks are out of step with reality yet they are still on the dancing floor- holding the same assets they know are extremely over-priced.

Today ‘music’ is akin to the equities bubble that has inflamed in the recent months.

Every trader and investor believes they will foresee the correction and jump off the market at its highs just in time for the correction. How that is possible – is difficult to tell.

The dizzy heights at which the market is trading today do not suggest that money managers are not paying attention to fundamentals.

The rush into equities is now beyond the pretext of ‘inflation cover.’

This is now more about fear of missing out perhaps the greatest and shortest rally in the history of the ZSE.

By staying out of equities, when peers are recording double digit monthly returns, a manager can lose assets to competitors.

Continued next page

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