The Zimbabwe Stock Exchange is expected to continue on a downward trend and “may reach further lows with increased protests in the country.”
Total market capitalization as at 31 July 2016 stood at $2.731 billion, down from $3.062 billion as at the beginning of the year, losing 10.8 percent in the year to date.
As at 31 July 2016, 687.6 million shares valued at $101.1 million have been traded for the year 2016 against 1.703 billion shares valued at $157.1 million traded for the same period last year with foreigners dominating trade.
“Foreigners have been more active on the selling side for the year to date as political protests and bond notes introduction unsettles investors,” said Invictus.
After missing its self-imposed June deadline to clear $1.15 billion arrears owed to multilateral financial institutions, central bank governor John Mangudya said Zimbabwe is close to securing a $1 billion loan from Afreximbank and now expects to pay up by September.
The southern African nation has not received direct budgetary support from the IMF and World Bank in nearly two decades since it defaulted in 1999.
Diaspora remittances have become the major source of liquidity to the economy as Foreign Direct Investments (FDI) and exports remain subdued.
Last year the country recorded a paltry $421 million in FDI, compared to $545 million in 2014 while Diaspora remittances were reported at $830 million as at June 31, on course to pass the $935 million that was received for the whole of 2015.
“We are of the view that, if the trend persists, given a growing number of Zimbabweans in the diaspora, Diaspora may inject at least $1.5 billion by year end. We are, however, pessimistic about foreign direct investment, as investors call for institutional and economic reforms for remarkable inflows to start flowing into the country,” said Invictus.
The country has remained in a deflationary environment, reflecting a decline in aggregate consumer demand as consumer incomes remain subdued. Zimbabwe’s inflation for the month of July 2016 fell by 0.24 percentage points to -1.60 percent.
Invictus say it is likely to end the year in the negative as companies continue to cut prices to remain competitive.
“We forecast inflation to end the year at negative -1.5 percent as companies continue to readjust prices to remain competitive in a tough operating environment that is continually under intense pressure.”
Going forward Invictus urged government to prioritize debt clearance “to unlock liquidity for the economy to regain its momentum”.-The Source
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