THE Zimbabwe Stock Exchange (ZSE) shed off over ZW$2 billion in value during the first five months of the year as risk-averse foreign investors exited the local bourse after the government announced several interventionist measures to tame runaway inflation and a weakening domestic currency.
The ZSE opened the year under review on strong impetus as inflation hedge-seeking resumed. The runaway inflation and depreciating local currency put a strain on ZSE operations as foreign obligations required more and more local currency to be met.
Up until recently when the government limited operating hours on the ZSE, the exchange had become a haven for investors seeking to preserve value against the backdrop of a weakening economy.
Zimbabwe’s economy is experiencing high levels of inflation and a weakening domestic currency, among myriad economic headaches.
“The market registered sell-offs following stringent measures put in in place to curb mounting inflation.
Foreign investors maintained an exit stance with a net year-to-date foreign sell position of Z$2.066 billion during the first five months of 2022,” Gerald Dzangare, acting Securities and Exchange Commission chief executive, said during an annual general meeting. In United States dollar terms the ZSE lost US$5.4 million when calculated using this week’s official exchange rate of 379:1.
Market capitalisation was 120% up from the beginning of 2022 to close the month of May at ZW$2.893 trillion.
The ZSE recorded a net foreign seller’s position of ZW$9.73 billion in the year 2021 compared to a net sell position of ZW$5.42 billion in 2020. Foreign investor participation declined to 11.74% in 2021 compared to 22.81% in 2020.
While foreign investors exited the local bourse, the year 2022 turned out positively in terms of listings for both the Zimbabwe Stock Exchange and the Victoria Falls Stock Exchange. For the first time in the history of the ZSE, an Exchange-Traded Fund, purely home grown, was listed. This significantly transformed the market as it came with the addition of market makers to the market and also exposed investors to the concept of basic derivatives.
The Victoria Falls Stock Exchange, on the other hand, had three new listings, including a depositary receipt.
The ZSE is a licensed securities exchange in terms of the Securities and Exchange Act (24:25). Its core mandate is to facilitate long-term capital raising through listing of securities as well as offering secondary market securities trading and issuer regulation services.
Dating back to 1894, the ZSE has evolved into one of the longest-established capital raising platforms in Africa.