ZSE sees solid run in May

Enacy Mapakame

EQUITIES on the Zimbabwe Stock Exchange (ZSE) registered a solid performance in May, which was the first full month of the monetisation of the new structured currency — Zimbabwe Gold (ZiG).

The major highlight of the Reserve Bank of Zimbabwe’s Monetary Policy Statement released on April 5 was the introduction of ZiG.

The new currency is backed by 2,5 tonnes of precious metals, mostly gold, and US$100 million in foreign currency reserves.

According to market watchers, the economy has already registered some stability following the announcement of the 2024 MPS, which also noted the extension of the multi-currency system’s tenure to 2030.

The policy managed to stabilise inflation and exchange rates.

“Of note, however, is the continuation of a tight monetary policy, which is limiting the availability of local currency and suppressing activity of the capital markets,” said FBC Securities.

The market value of equities on the ZSE rose by 6,6 percent to close at US$1,7 billion compared to the previous month.

In local currency terms, the stock exchange grew by 5,4 percent to ZiG29,34 billion, driven by heavyweights that saw the top 10 index increase by 6,16 percent.

A total of 52,32 million shares exchanged hands, representing a 138 percent uplift to April.

Econet led in volumes traded at 22,96 million shares. The telecoms giant faced some headwinds during the year to February 29, 2024, which weighed on profitability, yet is still upbeat about an upturn going forward, supported by its robust investment into infrastructure and network upgrades.

Banking group NMB and ART were among the top three with 8,39 million and 7,05 million shares, respectively.

The value traded in real terms grew by 293 percent to US$3,80 million, which remains below the monthly average of US$6,82 million registered within the first three months of the year.

After the introduction of ZiG in early April, the ZSE has gradually built up activity.

“There remains upside for more fund inflow on the exchange,” said brokerage firm IH Securities.

“Forward-looking, the uncertainty around money supply developments and consumer liquidity in 2024 propels us to lean more towards defensive stocks that have strong dividend policies,” added the stockbroking firm.

One of the most watched counters on the ZSE, Delta, was among the top picks. The company has consistently registered volume and revenue growth over the years, demonstrating good prospects for long-term sustained demand for its products.

Management at the beverages giant has successfully defended margins, despite complexities in the local economic environment, characterised by utility (electricity and water) challenges and supply chain disruptions due to geopolitical conflicts.

“The group’s volume trajectory remains strong. We anticipate improved volume performance in the second half of the year supported by US dollar pricing, improvement in wages and salaries across various sectors, diaspora remittances, increased mining activity and Government spending on infrastructure projects,” said FBC Securities.

Other attractive counters for investors include Tanganda, Hippo, TSL and Tigere REIT.

Elsewhere, on the US dollar-denominated Victoria Falls Stock Exchange (VFEX), the likes of diversified industrial giant Innscor remain well-positioned to navigate challenges emanating from an uncertain global outlook and complexities in the local environment due, in part, to its diversified product offering.

Apart from that, the business operates in the consumer staples sector, where demand for its products has remained largely sustainable, even in times of economic downturns.

Innscor’s overall volume trajectory remains strong, underpinned by increased investments, with focus being deployed to expanding plant capacities, enhancing manufacturing capabilities and product extensions, as well as route-to-market initiatives that continue to be refined to drive volumes into new markets.

Despite a widespread dollarisation trend, activity on the VFEX remains largely subdued, with several counters trading at a discount to their fair value, creating pockets of value for investors.

“As capital gains are likely to remain subdued in the medium term, we recommend investors to take long-term positions in companies that have demonstrated resilience and have consistently paid dividends, such as Innscor Africa,” said FBC Securities.

Meanwhile, the VFEX All-Share Index marginally retreated from 99,61 percent on April 30 to close the month of May at 95,73, marking a 3,9 percent loss.

Total market value, likewise, lost 3,9 percent from US$1,2 billion to US$1,17 billion, over the same period.

Of the listed counters, eight traded in the red, with Zimplow leading on losses, dropping by 42 percent; while First Capital Bank ended the month as the top gainer, having moved 37 percent month-on-month.

Despite the bourse closing in the red, liquidity grew by 77,21 percent to US$3,99 million, spurred by trades in Innscor (US$1,04 million) and WestProp (US$0,85 million).

Volumes were also robust, increasing by 108 percent to 19,5 million shares, with Edgars contributing 37 percent.

The pipeline of counters migrating to the exchange remains steady, with Bridgefort Capital having announced its intention to move its listing to the bourse in the current year.

The VFEX also expects to launch a REIT category with the pending listing of The Mosi REIT, as well as the Eagle REIT.