ZSE records gains in inflationary environment

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The Zimbabwe Stock Exchange (ZSE) climbed significantly during an eventful six months ended June 28 2019. At a time when inflation has been creeping up, equity gauges saw double-digit gains year-to- date. The All Share Index and the Industrial Index advanced 40.01% and 40.31% to close the half year at 204.75 points and 683.51 points respectively. The Top 10 Index was up 35.99% to close at 197.21 points. Mining counters closed the period at 255.26 points, 12.10% up as a strengthening in the price of RioZim Limited by 24.34% outweighed an 11.01% decline in the price of Bindura Nickel Corporation. Year-on-year, the stock market is up 100.52% as measured by the All Share Index.

Gains were recorded in 50 counters during the period under review, while declines were seen in 5 counters. MedTech was the top riser, gaining 1,900.00%, followed by Willdale, up 359.77%, African Sun, up 327.00%, CBZ Holdings 254.65% and Rainbow Tourism Group, up 213.81%. Rainbow Tourism Group was the first company on the ZSE to declare a US Dollar dividend, creating renewed interest for investors. Top losses were recorded in PPC Limited, down 15.79%, Seedco Limited, down 13.86%, Bindura Nickel Corporation, down 11.01%, Fidelity Life Assurance, down 3.54% and TSL Limited, down 0.41%.

Activity on the ZSE picked up significantly during the month of February, just before the introduction of the interbank market for foreign exchange and also during the month of June, before the intervention of government with the new monetary measures (re-introduction of the Zimbabwe Dollar and supporting measures to strengthen economy). Volumes activity during the first half of the year was dominated by trades in CBZ Holdings which contributed 13.43%, followed by Cassava Smartech (11.84%) and Econet Wireless Zimbabwe (11.65%). To total volumes traded. A total of 1,144,095,928 shares changed hands during the period.

Total turnover during the period was $1,022,234,639 and it was largely driven by activity in Old Mutual, Cassava Smartech and Econet Wireless Zimbabwe, which contributed 20.63%, 18.92% and 18.73% respectively.

Among the heavyweights, Delta Corporation, Econet Wireless Zimbabwe and Cassva Smartech saw an uptick in their share prices by 24.63%, 28.55% and 38.11% respectively. Innscor Africa added 40.71%. Fungible counters Old Mutual and PPC saw mixed fortunes: Old Mutual gained 73.37% to close the period at $13.7500, with 20,820,832 shares worth $210,860,953 changing hands. PPC Limited, on the other hand, shed 15.79% to close at $1.6000 on total trades worth $11,326,429 during the period under review.

We anticipate that the growing hyperinflation fears will continue to drive investors towards none monetary assets. We have also started seeing some speculative behaviour on the local bourse as speculators try to profit from the prevailing market movements. As sellers largely continue to hold on to their stocks, we anticipate that the market will continue to trade higher this coming week, in the absence of any radical announcements by policy makers.

Moving into the second half of the year, policy changes are going to impact activity on the ZSE. For instance, we anticipate that the new RBZ regulations relating to the vesting of dual listed shares for a period of 90 days is going to significantly affect activity going forward given that during the first half of the year, the most traded counter in terms of value on the local bourse was Old Mutual as it provided an exit route for foreign investors who could not access forex on the interbank market. We anticipate that the inflation outlook will determine the direction of stock market returns : a hyperinflation outlook will continue to drive investors to the ZSE in search of value preserving assets. — Akribos Research

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