Tinaye Agere
Michael Tome
THE introduction of the Zimbabwe Gold currency (ZiG) and the subsequent enactment of back-up policies has positively impacted investor sentiment and is contributing to renewed confidence in the country’s stock exchange.
The renewed optimism is reflected in the performance of the Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchange (VFEX).
In July, the ZSE All Share Index experienced a notable nominal growth of 54 percent, which translates to a 53 percent increase in US dollar terms.
This growth builds on the 27,3 percent nominal return recorded in June, thereby indicating sustained upward momentum.
The increased liquidity of the ZiG has driven a bull run on the ZSE, with investors capitalising on low prices following the devaluation of portfolios during the Zimbabwean dollar era.
The VFEX All Share Index also saw a 2,2 percent rise in July, following a 5,6 percent increase in June.
The gains reflect the positive sentiment among investors.
The stability of the interbank rate has been crucial in maintaining stable pricing in the formal market, contributing to a steady inflation rate, which is a positive development for the overall economy.
As a result, the banking sector has started to gain traction, reflecting increased confidence in the capital markets.
Activity on the ZSE substantially improved to over pre-ZiG levels in July, with a total turnover traded in July coming in 173 percent higher than that registered in June.
However, the overall shares traded in July were 49 percent lower than in June, reflecting increased activity in market heavies compared to penny stocks.
The increased activity in penny stocks on VFEX shows improved positive investor morale in the medium term, as reflected by the total turn-over for July reaching a one-year record high.
Despite the overall positive outcome, the ZSE was highly oscillatory in the late sessions of the month, fueled by profit-taking-induced sell-offs following a bullish performance.
Foreign buys (inflows) slowed in July, while foreign outflows sharply rose, thereby signalling a shift in foreign investor activity.
On the US dollar-denominated VFEX, the overall positive investor sentiment sustained a positive trajectory for a third consecutive month.
The notable increase in overall share prices resulted in a mild 0,7 percent growth in market capitalisation from US$1,25 billion to a 10-month high of US$1,26 billion.
The value preservation on the ZSE is intricately linked to the Government’s approach to managing the widening exchange premium.
Online Reporter